Losses widen at IQE as it completes £81m fundraising

(Sharecast News) - IQE said on Thursday that it had completed an £81m fundraising, including a strategic investment from MACOM Technology Solutions, as the compound semiconductor wafer supplier also reported a wider adjusted annual loss and said improved trading momentum had continued into 2026.

The AIM-traded, Cardiff-based company said revenue fell 17.6% to £97.3m in the year ended 31 December, from £118.0m a year earlier, while adjusted EBITDA dropped 60.1% to £3.2m from £8.1m.

Its reported loss before tax was broadly unchanged at £37.0m, compared with £36.9m in 2024, while adjusted loss before tax widened to £27.9m from £22.3m.

Reported diluted losses per share narrowed to 3.77p from 3.96p, while adjusted diluted losses per share widened to 2.82p from 2.46p.

IQE said photonics revenue rose 15% to £57.1m, driven by funding releases for certain US military and defence programmes in the second half and continued growth in AI and data centre-related markets.

Wireless revenue fell 40% to £40.1m, reflecting uncertain macroeconomic conditions in the first half, softness in mobile handset demand and some end-customer requirements being met from existing inventory.

The company said adjusted EBITDA margin declined to 3% from 7%, reflecting the lower revenue base and underutilisation of manufacturing assets and capacity.

Reported net cashflow from operations improved to £8.1m from £1.3m, while cash capital expenditure fell to £5.1m from £11.4m.

Cash and cash equivalents stood at £15.7m at year-end, up from £4.7m, while adjusted net debt increased to £31.5m from £18.8m.

Alongside the results, IQE said all conditions to the fundraising had now been satisfied or waived, allowing it to strengthen its balance sheet and conclude its strategic review.

Admission of 332.2m new fundraising shares was expected to take place on or around 1 June.

Following admission, IQE said it would have 1.31bn ordinary shares in issue, of which 1.31bn would carry voting rights.

The fundraising, first announced in April, included a £30m subscription from MACOM for 151.5m new shares at 19.8p each, alongside the issue of £15m of new secured zero-coupon convertible loan notes to MACOM, also convertible at 19.8p.

MACOM is a global semiconductor manufacturer and an existing customer of IQE.

The fundraising also included the redemption of existing convertible loan notes and reinvestment by noteholders of most of the proceeds into 115.0m new shares, raising £22.8m.

IQE also raised £11m through a placing and up to £2m through a retail offer for existing shareholders.

The company said the net proceeds would be used to repay its existing revolving credit facility with HSBC, support working capital requirements and fund ongoing strategic investment.

Following completion of the fundraising and repayment of the HSBC facility, IQE said it would receive net cash inflows of £27.9m.

The transaction also brought IQE's strategic review to an end, meaning the company was no longer in an offer period under the Takeover Code.

Alongside the investment, IQE and MACOM agreed long-term strategic supply agreements, intended to support scalable, high-volume manufacturing across key growth segments.

IQE said trading in the first quarter of 2026 was in line with management expectations, with strong demand across all core segments.

The company said it was seeing accelerated demand for its indium phosphide solutions, which support optical photonics products for data centre and AI infrastructure, and expected that to be a material growth driver through 2026 and beyond.

It also reported ongoing strength in aerospace and defence markets, as well as VCSEL and wireless products supporting the consumer smartphone industry.

Revenue for 2026 was expected to grow by more than 20% year-on-year, with strong order book visibility into the second half, resulting in a high-single-digit to low-double-digit adjusted EBITDA position.

Operationally, IQE said it remained focused on fiscal discipline and discretionary cost controls, portfolio optimisation, yield improvements and manufacturing efficiencies.

Its global site optimisation programme continued during the year, with the exit from its silicon site in South Wales completed in the second half, following the cessation of manufacturing operations in the first quarter.

Chief executive Jutta Meier said the company had been encouraged by improved market conditions in the second half of 2025.

"This reflected a positive trajectory in key sectors including photonics for AI and data centres, aerospace and defence, and wireless products for consumer electronics," she said.

"The £81m fundraise from key partners is a transformational investment for IQE, giving us the balance sheet strength to invest in our future growth, while maintaining our global asset base."

Meier said IQE was "uniquely positioned as a critical enabler of the world's fastest-growing technology ecosystems".

"In particular, accelerating demand for our Indium Phosphide solutions supporting data centre and AI markets is expected to be a material growth driver throughout 2026 and beyond," she said.

"Taken together, a stronger IQE, coupled with favourable market conditions directly benefitting the business, gives me great confidence for the future."

When the fundraising was announced in April, Meier described the transaction as "transformational" for IQE.

"The investment from MACOM and other existing shareholders will provide the balance sheet strength to allow us to capitalise on the opportunities in front of us, while maintaining our unique global footprint," she said at the time.

Meier said IQE was better positioned to execute its growth strategy, including in key technologies such as indium phosphide and gallium nitride.

MACOM chief executive Stephen Daly said the company believed the transaction would allow IQE to realise its full potential in technology, operational execution and financial performance.

IQE said it was in the process of appointing two MACOM executives to its board as non-executive directors - chief operating officer Robert Dennehy and vice-president David O'Carroll.

Their appointments remained subject to customary nominated adviser due diligence.

Pending completion of that process, IQE said it had entered into a side letter with MACOM giving the investor limited consent rights.

Separately, IQE said that, following completion of the strategic review, Mark Cubitt had returned to the role of non-executive chair, while Harmesh Suniara had stepped down from the board as representative of Lombard Odier, which did not intend to nominate an alternate representative.

The company said it intended to appoint a permanent chief financial officer in due course.

At 0853 BST, shares in IQE were down 3.06% at 49.15p.

Reporting by Josh White for Sharecast.com.

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