IQE plc
(�IQE or the Group)
H1 2021 INTERIM RESULTS
Cardiff, UK
7 September 2021
Sustained performance year-on-year in line with expectations
Leadership update
IQE plc (AIM: IQE), the leading supplier of compound semiconductor wafer products and advanced material solutions to the global semiconductor industry, announces its results for the six months ended 30 June 2021 and provides an update on the leadership transition of the business.
H1 2021 Financials
H1 2021 £m* | H1 2020 £m* | Change (%) | Change at constant currency (%) | |
Revenue | 79.5 | 89.9 | (11.5) | (2.5) |
Adjusted EBITDA** | 11.6 | 16.3 | (28.9) | 0.1 |
Operating loss | (1.9) | (5.0) | 62.0 | |
Adjusted operating (loss) / profit | (0.9) | 4.3 | ||
Reported loss after tax | (2.7) | (5.0) | ||
Diluted EPS | (0.34p) | (0.66p) | ||
Adjusted diluted EPS | (0.21p) | 0.28p | ||
Cash generated from operations | 10.4 | 15.1 | (31.1) | |
Adjusted cash from operations | 9.1 | 16.2 | (44.1) | |
Capital Investment (PP&E) | 6.1 | 1.1 | ||
Net funds / (debt***) | 0.9 | (7.4) |
* All figures £m excluding diluted and adjusted diluted EPS.
** Adjusted Measures: Alternative performance measures are disclosed separately after a number of adjusted non-cash, one-off or non-operational items where it is deemed necessary by the Directors to do so to provide further understanding of the financial performance of the Group. Adjusted items are material items of income or expense that have been shown separately due to the significance of their nature or amount as detailed in note 8.
*** Net debt excludes IFRS16 lease liabilities.
The following highlights of the first half results is based on these adjusted profit measures, unless otherwise stated.
Financial Highlights
Operational Highlights
Board Updates
Dr Drew Nelson, outgoing Chief Executive Officer of IQE, said:
Todays results reflect the resilience of our business and highlight the ongoing commitment and hard work of our people who have, despite additional headwinds, largely sustained the record levels of performance at IQE that we reported a year ago.
In November 2020 the Company announced the search for my successor and my intention to continue in an ambassadorial and advisory role at IQE. As I now formally step aside as CEO, I am extremely proud of everything we have achieved at IQE to date and the critical role the business plays within the broader global industry, and Compound Semiconductor Cluster in South Wales. I look forward to supporting the Company in the next stage of IQEs development in my role as President and Non-Executive Board member, while also helping drive the development of the Compound Semiconductor Cluster.
Phil Smith, Executive Chairman of IQE, said:
Thanks to Drew Nelsons vision and drive, IQE has established a solid platform with strong market positions and global leadership in compound semiconductors. I share his enthusiasm for the future opportunities that lay ahead for IQE and I want to thank him for his incredible contribution to the business. I would also like to thank Sir David Grant for his contributions to IQE since 2012.
As part of my expanded role, I will focus on the execution of IQEs strategy and preparing the business for the arrival of the incoming CEO.
Current trading and FY 2021 outlook
The market for GaAs power amplifiers is expected to continue to be strong through H2 2021 and grow further in FY 2022, driven by continued 5G penetration of the smartphone handset market and by WiFi 6 & 6E.
The market for GaN for 5G infrastructure has been weak in the first half of the year due to the nature of global 5G deployments. This is expected to continue in Q3. The Group sees potential opportunities for higher volumes in Q4 ahead of an anticipated return to growth in FY 2022.
In Photonics, production of VCSELs and advanced sensing for defence and security markets is expected to continue at relatively stable levels, with possible volume opportunities in VCSEL in Q4 related to the success of handset launches.
A significant foreign exchange headwind is being experienced in FY 2021 on a reported basis, as the Groups revenues are predominantly earned in USD but are reported in GBP.
Full year revenues are expected to be similar to the prior year on a constant currency basis. At this level, adjusted EBITDA is also expected to be similar on a constant currency basis.
The Group reiterates guidance for capital expenditure on PP&E for FY 2021 in the range of £20m to £30m as investments are made in tool capacity to underpin anticipated growth in both Wireless and Photonics products in FY 2022 and beyond. A total of nine new, refurbished or re-commissioned tools will be coming online at the end of FY 2021/beginning of FY 2022.
Capitalisation of development costs is expected to be in the range of £5m to £8m for the full year as the Group continues to invest in its IT transformation and in future products to meet anticipated growing demand for compound semiconductors driven by the macro trends of 5G and connected devices.
Contacts:
IQE plc
+44 (0) 29 2083 9400
Phil Smith
Tim Pullen
Amy Barlow
Peel Hunt LLP (Nomad and Joint Broker)
+44 (0) 20 7418 8900
Edward Knight
Paul Gillam
Nick Prowting
Citigroup Global Markets Limited (Joint Broker)
+44 (0) 20 7986 4000
Christopher Wren
Peter Catterall
Headland Consultancy (Financial PR)
+ 44 (0) 20 38054822
Andy Rivett-Carnac: +44 (0) 7968 997 365
Chloe Francklin: +44 (0)78 3497 4624
ABOUT IQE
IQE is the leading global supplier of advanced compound semiconductor wafers and materials solutions that enable a diverse range of applications across:
As a scaled global epitaxy wafer manufacturer, IQE is uniquely positioned in this market which has high barriers to entry. IQE supplies the whole market and is agnostic to the winners and losers at chip and OEM level. By leveraging the Groups intellectual property portfolio including know-how and patents, it produces epitaxy wafers of superior quality, yield and unit economics.
IQE is headquartered in Cardiff UK, with c. 670 employees across nine manufacturing locations in the UK, US, Taiwan and Singapore, and is listed on the AIM Stock Exchange in London.
Financial Review
Consolidated Income Statement | ||||
6 months to | 6 months to | 12 months to | ||
30 Jun 2021 | 30 Jun 2020 | 31 Dec 2020 | ||
(All figures £000s) | Note | Unaudited | Unaudited | Audited |
Revenue | 79,544 | 89,862 | 178,016 | |
Cost of sales | (67,336) | (70,521) | (144,866) | |
Gross profit | 12,208 | 19,341 | 33,150 | |
Selling, general and administrative expenses | (14,006) | (24,260) | (34,697) | |
Impairment loss on financial assets | – | – | (3,788) | |
Profit on disposal of property, plant and equipment | – | – | (182) | |
Other gains / (losses) | 4 | (136) | (85) | – |
Operating loss | (1,934) | (5,004) | (5,517) | |
Finance costs | (1,067) | (1,156) | (2,165) | |
Reversal of losses of joint ventures accounted for using the equity method | – | – | 3,788 | |
Adjusted (loss) / profit before income tax | (1,933) | 3,186 | 3,221 | |
Adjustments | 8 | (1,068) | (9,346) | (7,115) |
Loss before income tax | (3,001) | (6,160) | (3,894) | |
Taxation | 272 | 1,189 | 1,001 | |
Loss for the period | (2,729) | (4,971) | (2,893) | |
Loss attributable to: | ||||
Equity shareholders | (2,729) | (5,269) | (3,271) | |
Non-controlling interests | – | 298 | 378 | |
(2,729) | (4,971) | (2,893) | ||
Loss per share attributable to owners of the parent during the period | ||||
Basic loss per share 10 | (0.34p) | (0.66p) | (0.41p) | |
Diluted loss per share 10 | (0.34p) | (0.66p) | (0.41p) | |
Adjusted basic and diluted earnings per share are presented in Note 10.
All items included in the loss for the period relate to continuing operations.
Consolidated statement of comprehensive income | |||
6 months to | 6 months to | 12 months to | |
30 Jun 2021 | 30 Jun 2020 | 31 Dec 2020 | |
(All figures £000s) | Unaudited | Unaudited | Audited |
Loss for the period | (2,729) | (4,971) | (2,893) |
Currency translation differences on foreign currency net investments* | (1,057) | 8,424 | (6,104) |
Total comprehensive (expense) / income for the period | (3,786) | 3,453 | (8,997) |
Total comprehensive income / (expense) attributable to: | |||
Equity shareholders | (3,786) | 2,824 | (9,482) |
Non-controlling interest | – | 629 | 485 |
(3,786) | 3,453 | (8,997) |
* Balance might subsequently be reclassified to the income statement when it becomes realised.
Consolidated Balance Sheet | As At | As At | As At | |
30 Jun 2021 | 30 Jun 2020 | 31 Dec 2020 | ||
(All figures £000s) | Note | Unaudited | Unaudited | Audited |
Non-current assets | ||||
Intangible assets | 102,461 | 114,605 | 105,772 | |
Property, plant and equipment | 125,088 | 135,159 | 126,229 | |
Right of use assets | 42,539 | 38,678 | 37,339 | |
Deferred tax assets | 8,526 | 7,955 | 7,821 | |
Financial assets | – | – | – | |
Total non-current assets | 278,614 | 296,397 | 277,161 | |
Current assets | ||||
Inventories | 29,247 | 32,371 | 30,887 | |
Trade and other receivables | 39,459 | 42,546 | 38,575 | |
Cash and cash equivalents | 12 | 20,556 | 17,385 | 24,663 |
Total current assets | 89,262 | 92,302 | 94,125 | |
Total assets | 367,876 | 388,699 | 371,286 | |
Current liabilities | ||||
Trade and other payables | (32,764) | (36,184) | (35,605) | |
Current tax liabilities | (1,221) | (1,430) | (1,426) | |
Bank borrowings | (6,201) | (5,135) | (6,201) | |
Lease liabilities | 12 | (4,394) | (4,167) | (4,798) |
Provisions for other liabilities and charges | (2,430) | (354) | (515) | |
Total current liabilities | (47,010) | (47,270) | (48,545) | |
Non-current liabilities | ||||
Bank borrowings | 12 | (13,466) | (19,632) | (16,539) |
Lease liabilities | 12 | (48,245) | (43,913) | (42,226) |
Provisions for other liabilities and charges | (1,303) | (1,486) | (1,487) | |
Deferred tax liabilities | (1,981) | (2,203) | (2,054) | |
Total non-current liabilities | (64,995) | (67,234) | (62,306) | |
Total liabilities | (112,005) | (114,504) | (110,851) | |
Net assets | 255,871 | 274,195 | 260,435 | |
Equity attributable to shareholders of the parent | ||||
Share capital | 14 | 8,013 | 7,968 | 8,004 |
Share premium | 154,375 | 152,560 | 154,185 | |
Retained earnings | 57,731 | 58,557 | 62,089 | |
Exchange rate reserve | 20,234 | 35,595 | 21,291 | |
Other reserves | 15,518 | 15,036 | 14,866 | |
255,871 | 269,716 | 260,435 | ||
Non-controlling Interest | – | 4,479 | – | |
Total equity | 255,871 | 274,195 | 260,435 |
Consolidated Statement of Changes in Equity
Unaudited (All figures £000s) | Share capital | Share premium | Retained earnings | Exchange rate reserve | Other reserves | Non-controlling interests | Total equity |
At 1 January 2021 | 8,004 | 154,185 | 62,089 | 21,291 | 14,866 | – | 260,435 |
(Loss) / Profit for the period | – | – | (2,729) | – | – | – | (2,729) |
Other comprehensive expense for the year | – | – | – | (1,057) | – | – | (1,057) |
Total comprehensive (expense) / income | – | – | (2,729) | (1,057) | – | – | (3,786) |
Share based payments | – | – | – | – | 754 | – | 754 |
Tax relating to share options | – | – | – | – | (102) | – | (102) |
Proceeds from shares issued | 9 | 190 | – | – | – | – | 199 |
Acquisition of non-controlling interest | – | – | (1,629) | – | – | – | (1,629) |
Total transactions with owners | 9 | 190 | (1,629) | – | 652 | – | (778) |
At 30 June 2021 | 8,013 | 154,375 | 57,731 | 20,234 | 15,518 | – | 255,871 |
Unaudited (All figures £000s) | Share capital | Share premium | Retained earnings | Exchange rate reserve | Other reserves | Non-controlling interests | Total equity |
At 1 January 2020 | 7,961 | 152,385 | 63,826 | 27,502 | 14,919 | 3,850 | 270,443 |
(Loss) / Profit for the period | – | – | (5,269) | – | – | 298 | (4,971) |
Other comprehensive expense for the year | – | – | – | 8,093 | – | 331 | 8,424 |
Total comprehensive (expense) / income | – | – | (5,269) | 8,093 | – | 629 | 3,453 |
Share based payments | – | – | – | – | 225 | – | 225 |
Tax relating to share options | – | – | – | – | 5 | – | 5 |
Proceeds from shares issued | 7 | 175 | – | – | (113) | – | 69 |
Total transactions with owners | 7 | 175 | – | – | 117 | – | 299 |
At 30 June 2020 | 7,968 | 152,560 | 58,557 | 35,595 | 15,036 | 4,479 | 274,195 |
Audited (All figures £000s) | Share capital | Share premium | Retained earnings | Exchange rate reserve | Other reserves | Non-controlling interests | Total equity |
At 1 January 2020 | 7,961 | 152,385 | 63,826 | 27,502 | 14,919 | 3,850 | 270,443 |
(Loss) / Profit for the year | – | – | (3,271) | – | – | 378 | (2,893) |
Other comprehensive income for the year | – | – | – | (6,211) | – | 107 | (6,104) |
Total comprehensive income | – | – | (3,271) | (6,211) | – | 485 | (8,997) |
Share based payments | – | – | – | – | 55 | – | 55 |
Tax relating to share options | – | – | – | – | 57 | – | 57 |
Proceeds from shares issued | 17 | 388 | – | – | (165) | – | 240 |
Acquisition of non-controlling interest | 26 | 1,412 | 1,534 | – | – | (4,335) | (1,363) |
Total transactions with owners | 43 | 1,800 | 1,534 | – | (53) | (4,335) | (1,011) |
At 31 December 2020 | 8,004 | 154,185 | 62,089 | 21,291 | 14,866 | – | 260,435 |
Consolidated Cash Flow Statement | 6 months to | 6 months to | 12 months to | |||
30 Jun 2021 | 30 Jun 2020 | 31 Dec 2020 | ||||
(All figures £000s) | Note | Unaudited | Unaudited | Audited | ||
Cash flows from operating activities | ||||||
Adjusted cash inflow from operations | 9,077 | 16,229 | 36,324 | |||
Cash impact of adjustments | 8 | 1,277 | (1,144) | (867) | ||
Cash generated from operations | 11 | 10,354 | 15,085 | 35,457 | ||
Net interest paid | (459) | (247) | (1,142) | |||
Income tax paid | (842) | (629) | (993) | |||
Net cash generated from operating activities | 9,053 | 14,209 | 33,322 | |||
Cash flows from investing activities | ||||||
Purchase of property, plant and equipment | (6,138) | (1,129) | (4,993) | |||
Purchase of intangible assets | (147) | (386) | (731) | |||
Capitalised development expenditure | (1,846) | (2,557) | (4,678) | |||
Acquisition of minority interest | – | – | (1,363) | |||
Net cash used in investing activities | (8,131) | (4,072) | (11,765) | |||
Cash flows from financing activities | ||||||
Proceeds from issuance of ordinary shares | 208 | 69 | 240 | |||
Repayment of borrowings | (3,073) | (5,000) | (7,030) | |||
Proceeds from borrowings | – | 5,000 | 5,000 | |||
Payment of lease liabilities | (1,973) | (1,869) | (3,764) | |||
Net cash (used) / generated from financing activities | (4,838) | (1,800) | (5,554) | |||
Net (decrease) / increase in cash and cash equivalents | (3,916) | 8,337 | 16,003 | |||
Cash and cash equivalents at the beginning of the period | 24,663 | 8,800 | 8,800 | |||
Exchange (losses) / gains on cash and cash equivalents | (191) | 248 | (140) | |||
Cash and cash equivalents at the end of the period | 12 | 20,556 | 17,385 | 24,663 | ||
1. REPORTING ENTITY
IQE plc is a public limited company incorporated in the United Kingdom under the Companies Act 2006. The Company is domiciled in the United Kingdom and is quoted on the Alternative Investment Market (AIM).
These condensed consolidated interim financial statements (interim financial statements) as at and for the six months ended 30 June 2021 comprise the Company and its Subsidiaries (together referred to as the Group). The principal activities of the Group are the development, manufacture and sale of advanced semiconductor materials.
2. BASIS OF PREPARATION
These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, and should be read in conjunction with the Groups last annual consolidated financial statements as at and for the year ended 31 December 2020 which were approved by the Board of Directors on 25 March 2021 and have been delivered to the Registrar of Companies. The report of the auditors on those financial statements was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.
The interim financial statements do not include all of the information required for a complete set of IFRS financial statements and do not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Groups financial position and performance since the last annual financial statements.
Comparative information in the interim financial statements as at and for the year ended 31 December 2020 has been taken from the published audited financial statements as at and for the year ended 31 December 2020. All other periods presented are unaudited.
The Companys auditor in accordance with ISRE 2410 has reviewed the financial information contained in these interim financial statements. This review does not constitute an audit.
The Board of Directors and the Audit Committee approved the interim financial statements on 7 September 2021.
3. GOING CONCERN
The Group made a loss of £2.7m (H1 2020: £5.0m, FY20: £2.9m) and used £3.9m of cash and cash equivalents (H1 2020: £8.3m generated, FY20: £16.0m generated) resulting in a net funds position (excluding lease liabilities) of £0.9m (H1 2020: £2.2m net debt, FY20: £1.9m net funds) as at 30 June 2020.
The following matters have been considered by the directors in determining the appropriateness of the going concern basis of preparation in the financial statements:
The Group meets its day-to-day working capital and other cash requirements through its bank facilities and available cash. The Groups cash flow forecasts and projections, in conjunction with the level of assessed covenant headroom on the Groups committed bank facilities show that the Group has adequate cash resources to continue operating and to meet its liabilities as they fall due for the assessed period to 31 December 2022, such that the directors consider it appropriate to adopt the going concern basis of accounting in preparing the interim financial statements.
4. USE OF JUDGEMENTS AND ESTIMATES
In preparing these interim financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.
The significant judgements made by management in applying the Groups accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements except as follows:
The impact of Coronavirus in the six-month period ended 30 June 2021 has not resulted in any indicators impairment or had a meaningful impact on significant judgements or the level of estimation uncertainty associated with the application of the Groups accounting policies. Coronavirus has had no material adverse impact on the Groups business operations with production continuing uninterrupted at all global sites.
Derivative Forward Currency Contracts
At 30 June 2021 the Group had outstanding derivative forward currency contracts with a nominal value of $13.1m (H1 2020: $16.5m, FY20: $nil) for the sale of US$ in exchange for GBP£.
The Groups accounting policies require that derivative forward currency contracts are measured at fair value. When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follow:
Derivative forward currency contracts have been categorised as Level 1 in the fair value hierarchy. The fair value of the derivative instrument has been assessed using quoted prices in active markets for identical assets or liabilities using independent mark to market valuations provided by an appropriately regulated financial institution.
The fair value liability of £0.1m (H1 2020: £0.1m liability, FY20: £nil) has been included in the balance sheet in trade and other payables with the fair value loss on the derivative instruments included in Other gains / (losses) in the consolidated income statement.
5. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied in these interim financial statements are the same as those applied in the Groups consolidated financial statements as at and for the year ended 31 December 2020. A number of new standards are effective from 1 January 2021 but they do not have a material effect on the Groups financial statements.
Recent accounting developments and the policy for recognising and measuring income taxes in the interim period are described below.
5.1 Recent accounting developments
In preparing the interim financial statements, the Group has adopted the following Standards, amendments and interpretations, which are effective for 2021 and will be adopted in the financial statements for the year ended 31 December 2021:
The adoption of these standards and amendments has not had a material impact on the interim financial statements.
5.2 Income tax expense
Income tax expense is recognised at an amount determined by multiplying the profit / (loss) before tax for the interim reporting period by managements best estimate of the weighted-average annual income tax rate expected for the full financial year, adjusted for the tax effect of certain items recognised in full in the interim period. As such, the effective tax rate in the interim financial statements may differ from managements estimate of the effective tax rate for the annual financial statements.
6. PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties affecting the Group are set out in the Strategic Report in the 2020 Annual report and financial statements and remain unchanged at 30 June 2021.
The principal risks and uncertainties include health, safety and environment, loss of key personnel, cybersecurity, infringement or loss of intellectual property, legal and regulatory compliance, changes in international export control laws, competition and/or erosion of market opportunity, customer concentration, insufficient cash or funding to underpin investment opportunities and the failure of new products or technology to deliver expected levels of revenue and profitability.
Three key risks to IQE were identified as possible impacts from Coronavirus, being adverse effects to the health and safety of employees, business disruption and reduced product demand. These risks were, and continue to be, closely monitored by a dedicated business continuity committee and the Group has seen no material impact on business operations due to the pandemic with continuous production maintained at all of the Groups global sites throughout H1 2021. While the full effects of the Coronavirus pandemic on global economic output in 2020 and beyond are still uncertain, the Group forecasts continued underlying market demand for IQEs products.
7. SEGMENTAL INFORMATION
Revenue | 6 Months to 30 June 2021 | 6 Months to 30 June 2020 | 12 Months to 31 Dec 2020 |
Wireless | 41,631 | 45,485 | 94,193 |
Photonics | 36,409 | 43,425 | 81,627 |
CMOS++ | 1,504 | 952 | 2,196 |
Revenue | 79,544 | 89,862 | 178,016 |
Adjusted operating (loss) / profit | |||
Wireless | 3,731 | 6,877 | 11,393 |
Photonics | 3,514 | 6,071 | 9,080 |
CMOS++ | (401) | (563) | (714) |
Central corporate costs | (7,710) | (8,043) | (14,373) |
Adjusted operating (loss) / profit | (866) | 4,342 | 5,386 |
Adjusted items | (1,068) | (9,346) | (10,903) |
Operating loss | (1,934) | (5,004) | (5,517) |
Reversal of losses of joint venture accounted for using the equity method | – | – | 3,788 |
Finance costs | (1,067) | (1,156) | (2,165) |
Loss before tax | (3,001) | (6,160) | (3,894) |
8. ADJUSTED PROFIT MEASURES
The Groups results report certain financial measures after a number of adjusted items that are not defined or recognised under IFRS including adjusted operating profit, adjusted profit before income tax and adjusted earnings per share. The Directors believe that the adjusted profit measures provide a more useful comparison of business trends and performance and allow management and other stakeholders to better compare the performance of the Group between the current and prior year, excluding the effects of certain non-cash charges, non-operational items and significant infrequent items that would distort period on period comparability. The Group uses these adjusted profit measures for internal planning, budgeting, reporting and assessment of the performance of the business. The tables below show the adjustments made to arrive at the adjusted profit measures and the impact on the Groups reported financial performance.
Adjusted | Adjusted | 6 months to 30 Jun 2021 Reported | Adjusted | Adjusted | 6 months to 30 Jun 2020 Reported | Adjusted | Adjusted | 2020 | |
£000s | Results | Items | Results | Results | Items | Results | Results | Items | Results |
Revenue | 79,544 | – | 79,544 | 89,862 | – | 89,862 | 178,016 | – | 178,016 |
Cost of sales | (67,083) | (253) | (67,336) | (70,429) | (92) | (70,521) | (144,689) | (177) | (144,866) |
Gross profit | 12,461 | (253) | 12,208 | 19,433 | (92) | 19,341 | 33,327 | (177) | 33,150 |
Other losses | (136) | – | (136) | (85) | – | (85) | – | – | – |
SG&A | (13,191) | (815) | (14,006) | (15,006) | (9,254) | (24,260) | (27,759) | (6,938) | (34,697) |
Impairment loss on financial assets | – | – | – | – | – | – | – | (3,788) | (3,788) |
Profit on disposal of PPE | – | – | – | – | – | – | (182) | – | (182) |
Operating (loss) / profit | (866) | (1,068) | (1,934) | 4,342 | (9,346) | (5,004) | 5,386 | (10,903) | (5,517) |
Reversal of JV losses | – | – | – | – | – | – | – | 3,788 | 3,788 |
Finance costs | (1,067) | – | (1,067) | (1,156) | – | (1,156) | (2,165) | – | (2,165) |
(Loss) / profit before tax | (1,933) | (1,068) | (3,001) | 3,186 | (9,346) | (6,160) | 3,221 | (7,115) | (3,894) |
Taxation | 243 | 29 | 272 | (637) | 1,826 | 1,189 | (519) | 1,520 | 1,001 |
(Loss) / profit for the period | (1,690) | (1,039) | (2,729) | 2,549 | (7,520) | (4,971) | 2,702 | (5,595) | (2,893) |
Pre-tax | Tax | 6 months to 30 Jun 2021 Reported | Pre-tax | Tax | 6 months to 30 Jun 2020 Reported | Pre-tax | Tax | 2020 | |
£000s | Adjustment | Impact | Results | Adjustment | Impact | Results | Adjustment | Impact | Results |
Share based payments | (758) | (45) | (803) | (275) | 44 | (231) | (265) | 210 | (55) |
Restructuring | (310) | 74 | (236) | – | – | – | (162) | 39 | (123) |
Patent dispute legal fees | – | – | – | (694) | 132 | (562) | 1,689 | (321) | 1,368 |
Impairment intangibles | – | – | – | (6,537) | 1,300 | (5,237) | (6,537) | 1,242 | (5,295) |
Onerous contract | – | – | – | (1,840) | 350 | (1,490) | (1,840) | 350 | (1,490) |
Impairment financial assets | – | – | – | – | – | – | (3,788) | – | (3,788) |
Reversal of JV losses financial asset | – | – | – | – | – | – | 3,788 | – | 3,788 |
Total | (1,068) | 29 | (1,039) | (9,346) | 1,826 | (7,520) | (7,115) | 1,520 | (5,595) |
The nature of the adjusted items is as follows:
Current Period Adjusted Items
Comparative Period Adjusted Items
Adjusted EBITDA (adjusted earnings before interest, tax, depreciation and amortisation) has been calculated as follows:
(All figures £000s) | 6 months to 30 June 2021 Unaudited | 6 months to 30 June 2020 Unaudited | 12 months to 31 Dec 2020 Audited |
Loss attributable to equity shareholders | (2,729) | (5,269) | (3,271) |
Non-controlling interest | – | 298 | 378 |
Finance costs | 1,067 | 1,156 | 2,165 |
Tax | (272) | (1,189) | (1,001) |
Depreciation of property, plant and equipment | 6,583 | 6,230 | 12,983 |
Depreciation of right of use assets | 1,888 | 1,850 | 3,681 |
Amortisation of intangible fixed assets | 4,006 | 3,904 | 7,869 |
(Profit) / loss on disposal of PPE | – | – | 182 |
Share based payments | 758 | 275 | 265 |
Adjusted Items | 310 | 9,071 | 6,850 |
Restructuring | 310 | – | 162 |
Patent dispute legal costs | – | 694 | (1,689) |
Impairment of intangibles | – | 6,537 | 6,537 |
Onerous contract provision | – | 1,840 | 1,840 |
Impairment of financial asset | – | – | 3,788 |
Share of joint venture losses (financial asset) | – | – | (3,788) |
Adjusted EBITDA | 11,611 | 16,326 | 30,101 |
9. TAXATION
The Groups consolidated effective tax rate for the six months ended 30 June 2021 was 9.1% (H1 2020: 19.3%, 2020: 25.7%). The effective tax rate differs from the theoretical amount that would arise from applying the standard corporation tax in the UK of 19.0% (H1 2020: 19.0%, FY20: 19.0%) principally due to the following factors:
10. EARNINGS / (LOSS) PER SHARE
(All figures £000s) | 6 months to 30 June 2021 Unaudited | 6 months to 30 June 2020 Unaudited | 12 months to 31 Dec 2020 Audited |
Loss attributable to ordinary shareholders | (2,729) | (5,269) | (3,271) |
Adjustments to loss after tax (note 8) | 1,039 | 7,520 | 5,595 |
Adjusted profit / (loss) attributable to ordinary shareholders | (1,690) | 2,251 | 2,324 |
Number of shares: | |||
Weighted average number of ordinary shares | 801,020,442 | 796,338,502 | 797,228,579 |
Dilutive share options | 14,931,713 | 8,963,049 | 11,395,298 |
815,952,155 | 805,301,551 | 808,623,877 |
Adjusted basic (loss) / earnings per share | (0.21p) | 0.28p | 0.29p |
Basic loss per share | (0.34p) | (0.66p) | (0.41p) |
Adjusted diluted (loss) / earnings per share | (0.21p) | 0.28p | 0.29p |
Diluted loss per share | (0.34p) | (0.66p) | (0.41p) |
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares during the period.
Diluted loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of shares and in the money share options in issue. Share options are classified as in the money if their exercise price is lower than the average share price for the period. As required by IAS 33, this calculation assumes that the proceeds receivable from the exercise of in the money options would be used to purchase shares in the open market in order to reduce the number of new shares that would need to be issued.
11. CASH GENERATED FROM OPERATIONS
(All figures £000s) | 6 months to 30 June 2021 Unaudited | 6 months to 30 June 2020 Unaudited | 12 months to 31 Dec 2020 Audited |
Loss before tax | (3,001) | (6,160) | (3,894) |
Finance costs | 1,067 | 1,156 | 2,165 |
Depreciation of property, plant and equipment | 6,583 | 6,230 | 12,983 |
Depreciation of right of use assets | 1,888 | 1,850 | 3,681 |
Amortisation of intangible assets | 4,006 | 3,904 | 7,869 |
Impairment of intangible assets | – | 6,537 | 6,537 |
Impairment of financial assets | – | – | 3,788 |
Reversal of losses of joint ventures accounted for using the equity method | – | – | (3,788) |
Non-cash provision movements | 310 | 1,840 | 2,002 |
Inventory write downs | 623 | 2,167 | 3,025 |
Loss on disposal of property, plant and equipment | – | – | 182 |
Share based payments | 758 | 275 | 265 |
Cash inflow from operations before changes in working capital | 12,234 | 17,799 | 34,815 |
Decrease / (increase) in inventories | 769 | (2,920) | (4,128) |
(Increase) in trade and other receivables | (878) | (6,064) | (7,151) |
(Decrease) / increase in trade and other payables | (1,771) | 6,270 | 11,921 |
Cash inflow from operations | 10,354 | 15,085 | 35,457 |
12. ANALYSIS OF NET DEBT
(All figures £000s) | 6 months to 30 June 2021 Unaudited | 6 months to 30 June 2020 Unaudited | 12 months to 31 Dec 2020 Audited | ||
Bank borrowings due after one year | (13,466) | (19,632) | (16,539) | ||
Bank borrowings due within one year | (6,201) | (5,135) | (6,201) | ||
Lease liabilities due after one year | (48,245) | (43,913) | (42,226) | ||
Lease liabilities due within one year | (4,394) | (4,167) | (4,798) | ||
Total borrowings | (72,306) | (72,847) | (69,764) | ||
Cash and cash equivalents | 20,556 | 17,385 | 24,663 | ||
Net debt | (51,750) | (55,462) | (45,101) |
On 24 January 2019, the Company agreed a new £25,200,000 ($35,000,000) multi-currency revolving credit facility, provided by HSBC Bank plc that is secured over the assets of IQE plc and certain subsidiary companies. The facility has a three-year term and an interest rate margin of between 1.45 and 1.95 per cent per annum over LIBOR on any drawn balances.
On 29 August 2019, the Company agreed a new £30,000,000 asset finance facility, provided by HSBC Bank plc that is secured over various plant and machinery assets. The facility has a five-year term and an interest rate margin of 1.65% per annum over base rate on any drawn balances.
Bank borrowings relate to amounts drawn down on the Groups asset finance facility.
Cash and cash equivalents comprise balances held in instant access bank accounts and other short-term deposits
with a maturity of less than 3 months.
13. SHARE BASED PAYMENT ARRANGEMENTS
Long term incentive awards
On 26 May 2000, as amended by shareholders at the Annual General Meeting on 17 May 2002, The Group established a share option plan that entitles the Groups Remuneration Committee to grant long term incentive awards over shares in the company to directors and employees of the Group.
On 19 February 2021, long term incentive awards that become exercisable between three and ten years from 31 March 2021, subject to continued employment and achievement of performance conditions relating to earnings per share and total shareholder return targets over a three-year vesting period were awarded to directors and employees of the Group. Under the terms of these awards, holders of vested options are entitled to purchase shares at the nominal value of the shares at the date of grant.
All options are to be settled by physical delivery of shares. The terms and conditions of the share options granted during the six months ended 30 June 2021 are as follows:
Grant date/employees entitled | Number of instruments | Contractual life of options | Vesting conditions |
Option grant to executive directors on 19 February 2021 | 1,872,174 | 10 years | 3 years-service from grant date, diluted adjusted earnings per share targets between 0.50p 0.80p and total shareholder return targets of between 100% – 130% versus the FTSE All Share Index |
Option grant to employees on 19 February 2021 and 21 May 2021 | 4,449,583 | 10 years | 3 years-service from grant date, diluted adjusted earnings per share targets between 0.50p 0.80p and total shareholder return targets of between 100% – 130% versus the FTSE All Share Index |
Measurement of grant date fair values
The fair value of the long-term incentive awards, calculated as £3.3m (FY20: £1.4m) at the grant date has been determined using the Monte Carlo and Black Scholes models. The following inputs were used in the measurement of the fair values at grant date.
Principal assumptions | 2021 | 2020 |
Weighted average share price at grant date | 44.00 | 37.85 |
Weighted average exercise price | 8.20 | 12.35 |
Weighted average vesting period (years) | 3 | 3 |
Option life (years) | 10 | 10 |
Weighted average expected life (years) | 3 | 3 |
Weighted average expected volatility factor | 68% | 64% |
Weighted average risk-free rate | 0.4% | 0.6% |
Dividend yield | 0% | 0% |
The expected volatility factor is based on historical share price volatility over the three years immediately preceding the grant of the option. The expected life is the average expected period to exercise. The risk-free rate of return is the yield of zero-coupon UK government bonds of a term consistent with the assumed option life.
Non-market performance conditions are incorporated into the calculation of fair value by estimating the proportion of share options that will vest and be exercised based on a combination of historical trends and future expected trading performance. These are reassessed at the end of each period for each tranche of unvested options.
14. SHARE CAPITAL
Number of shares | 6 months to 30 June 2021 Unaudited | 6 months to 30 June 2020 Unaudited | 12 months to 31 Dec 2020 Audited |
As at 1 January | 800,364,569 | 796,142,302 | 796,142,302 |
Employee share schemes | 954,910 | 673,585 | 1,615,578 |
IQE Taiwan minority interest acquisition equity consideration | – | – | 2,606,689 |
As at 30 June / 31 December | 801,319,479 | 796,815,887 | 800,364,569 |
(All figures £000s) | 6 months to 30 June 2021 Unaudited | 6 months to 30 June 2020 Unaudited | 12 months to 31 Dec 2020 Audited |
As at 1 January | 8,004 | 7,961 | 7,961 |
Employee share schemes | 9 | 7 | 17 |
IQE Taiwan minority interest acquisition equity consideration | – | – | 26 |
As at 30 June / 31 December | 8,013 | 7,968 | 8,004 |
15. RELATED PARTY TRANSACTIONS
Transactions with Joint Ventures
Compound Semiconductor Centre Limited (CSC)
The Group established CSC with its joint venture partner as a centre of excellence for the development and commercialisation of advanced compound semiconductor wafer products in Europe and on its formation, the Group contributed assets to the joint venture valued at £12,000,000 as part of its initial investment.
The activities of CSC include research and development into advanced compound semiconductor wafer products, the provision of contract manufacturing services for compound semiconductor wafers to certain subsidiaries within the IQE plc Group and the provision of compound semiconductor manufacturing services to other third parties.
CSC operates from its manufacturing facilities in Cardiff, United Kingdom and leases certain additional administrative building space from the Group. During the period the CSC leased this space from the Group for £57,500 (H1 2020 £57,500, FY20: £115,000) and procured certain administrative support services from the Group for £117,500 (H1 2020: £117,500, FY20: £235,000). As part of the administrative support services provided to CSC the Group procured goods and services, recharged to CSC at cost, totalling £1,661,584 (H1 2020: £1,971,028, FY20: £3,740,282).
CSC granted the Group the right to use its assets following its formation for a minimum five-year period. Costs associated with the right to use the CSCs assets are treated by the Group as operating lease costs. Costs are charged by the CSC at a price which reflects the CSCs cash cost of production (including direct labour, materials and site costs) but excludes any related depreciation or amortisation of the CSCs property, plant and equipment and intangible assets respectively under the terms of the joint venture agreement between the parties. Costs associated with the right to use the CSCs assets totalled £3,012,300 (H1 2020: £3,223,900, FY20: £6,365,000) in the period.
At 30 June 2021 an amount of £349,000 (H1 2020: £559,800, FY20: £322,000) was owed from the CSC.
In the Groups balance sheet A Preference Shares with a nominal value of £8,800,000 (H1 2020: £8,800,000, FY20: £8,800,000) are included in financial assets at an amortised cost of £nil (H1 2020: £3,951,000, FY20: £nil) and the Group has a shareholder loan of £243,000 (H1 2020: £240,500, FY20: £241,000) due from CSC.
16. RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
Dr Drew Nelson OBE President and Chief Executive Officer, IQE Plc. 7 September 2021 | Tim Pullen Chief Financial Officer, IQE Plc. 7 September 2021 |
HONG KONG SAR - Media OutReach Newswire - 8 November 2024 - ZJLD Group Inc.…
REACH, Singapore and Reggio Children, Italy present Mosaic of Marks, Words, Material SINGAPORE - Media…
KUALA LUMPUR, MALAYSIA - Media OutReach Newswire - 8 November 2024 - Trading offers a…
SINGAPORE - Media OutReach Newswire - 8 November 2024 - Home Action Party (HAP) is…
SINGAPORE - Media OutReach Newswire - 8 November 2024 - The Asia Pacific Enterprise Awards…
An iterative process is highly effective in increasing the value of large items HONG KONG…