Pre-Close Trading Update

27 Jan 2006 07:01

IQE PLC27 January 2006 For Immediate Release 27th January 2006 IQE plc Pre Close Trading Update IQE plc ("IQE" or "the Group"), a leading global outsource supplier ofcustomised wafers to the semiconductor industry, is pleased to provide a PreClose Trading Update, following continued good progress within the Group'sactivities during the second half of 2005. As anticipated in last year's trading update, the Group has made verysubstantial progress during 2005 with the result that revenues for the secondhalf of 2005 are likely to be approximately £11.3 million, a year on yearincrease compared with H2'04 of 55%, and a sequential increase over H1'05 of17%. Full year revenues for 2005 are therefore likely to be around £21 million,an increase of 37% on the prior year revenues of £15.3 million. EBITDA loss for2005 is likely to be around £3.8 million, a reduction of 53% on the prior yearEBITDA loss of £8.1 million. Substantial progress was made in reducing theEBITDA loss as the year progressed and revenues increased, resulting in theGroup achieving EBITDA breakeven for the latter half of Q4'05. Costs have beenkept under close control, although unavoidable increases in energy costsresulted in a second half increase compared with H1. The Group decided to incur some exceptional rapid qualification costs in thesecond half of '05 in order to secure substantial new contracts for the currentfinancial year and subsequent years. It is anticipated that these specificqualifications are likely to generate revenues of at least $5 million for theGroup in 2006. These, combined with the $2 million of additional revenuesexpected from the newly secured, five year, full outsource contract separatelyannounced today, and the anticipated revenues in 2006 of some $15 million fromthe largest of the Group's existing outsource contracts, means that visibilityof the Group's future revenue stream continues to improve. Cash on hand at the year end is likely to be in excess of £6 million, followingthe draw down of a newly secured bank loan to fund the Group's working capitalrequirements as revenues continue to increase substantially. In addition to theworking capital loan, the Group also has access to a £2 million overdraftfacility. Overall, the business climate continues to improve, with substantial demand nowbecoming apparent in several of the Group's end markets, particularly in thewireless sector where the Group is working with a number of very high profileaccounts. Wireless marketsThe wireless markets continued to strengthen during the year and indicationsfrom virtually all major accounts point to a buoyant year ahead as wirelesstechnology continues to permeate an increasing number of applications. Ourlargest full outsource partner has continued to win market share and weanticipate revenues from this customer in '06 of around 30% higher than those in'05 as a result of their increased market share. Several other outsourceaccounts continue to increase their demands and a number of additionalqualifications continue to progress. Opto marketsOptical storage, laser printing, short range communications markets continue tobe strong, and steady increases were achieved throughout 2005. This is set tocontinue in 2006, and coupled with an increasing fibre optics marketplace weexpect this division to continue to show steady progress during the forthcomingyear. Silicon MarketsA major feature of this marketplace is the increasing use of epitaxy in moststandard processes and the increasing focus on advanced technologies such asstrained silicon. IQE Silicon is well placed to benefit from both of thesedevelopments, and continues to win market share as evidenced by the Groupseparately announcing today the winning of a major full outsource contract forthis division which could be worth some $10 million to the Group over the nextfive years. Strong progress continues to be made on the advanced technologies,and there is now a higher level of interest being shown in moving thesetechnologies forward into pilot production during the coming year. Substrate marketsThe substrate marketplace continued to strengthen during 2005, as demand forcompound semi wafers increased and Wafer technology ended the year with itsstrongest order book for over three years. A number of technical developments,including improved surface finishes on key products and the development ofimproved quality, high margin products for infrared sensing applications helpedthe division end 2005 on a positive note which we anticipate will strengthenfurther during 2006. Commenting, Dr Drew Nelson, CEO of IQE plc said"Overall, the Board is confident that substantially increasing revenues, coupledwith the strong operational gearing of the business, improving visibility andadequate cash resources, will result in significantly improved shareholderreturns over the next few years". The Group expects to announce its preliminary results for the year ended 31December 2005 on 22nd March 2006. Dr Drew Nelson,CEO, IQE plc For further information, please contact: IQE plc :Drew Nelson +44 (0)2920-839400Stuart Hall +44 (0)2920-839400Chris Meadows +44 (0)2920-839400 Buchanan Communications :Tim Thompson/Nicola Cronk +44 (0)2074-665000 This information is provided by RNS The company news service from the London Stock Exchange