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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Iqe Plc | LSE:IQE | London | Ordinary Share | GB0009619924 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.70 | 2.35% | 30.50 | 30.25 | 30.40 | 30.75 | 29.80 | 29.80 | 792,070 | 16:35:18 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Electronic Components, Nec | 115.25M | -29.38M | -0.0305 | -9.92 | 286.63M |
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RNS Number:3355L
IQE PLC
21 May 2003
21st MAY 2003
IQE plc
1st Quarter 2003 Results
IQE plc (IQE), the world's leading global outsource supplier of customised
epitaxial wafers to the semi-conductor industry, today announces its 1st Quarter
2003 Results for the period ended 31 March 2003.
KEY POINTS
* Q1/2003 sales were #4.959m, 7% lower than the previous quarter (Q4/
2002: #5.316m) and 13% lower than the same quarter last year (Q1/2002:
#5.680m).
* Q1/2003 operating loss was #3.420m, 35% lower than the previous
quarter (Q4/2002: #5.276m) and 31% lower than the same quarter last year
(Q4/ 2002: #4.977m) due to continued cost cutting measures and reduced
depreciation charges resulting from the impairment charges taken in 2002.
* Q1/2003 operating cash outflow was #3.005m, compared with Q4/2002
#0.966m and Q1/2002 #3.319m.
* Q1/2003 capital expenditure was reduced to #0.070m compared with Q4/
2002 #0.576m and Q1/2002 #1.366m. Exceptional costs of #0.299m were also
incurred in the quarter associated with staff reductions and restructuring.
* Q1/2003 total cash outflow was #4.217m (Q4/2002: #2.233m) including
repayment of #1.219m of long term borrowing.
* Continued aggressive cost cutting measures, including a reduction of
50 staff as previously reported and restructuring of the Group, which will
save approximately #2.000m per year.
* Gross cash at the close of Q1/2003 was #13.497m (Q1/2002: #27.918m).
* Continued progress in diversifying the Group's product ranges,
particularly in the optical technologies area away from its traditional
reliance on optical communication products, should bear fruit in the
coming quarters.
* Some delays in order pull through from one major customer in the
wireless sector due to end customer design changes, otherwise continued
strength in the RF wireless sector.
Commenting on the results, Dr Drew Nelson, President/CEO said
"Although revenues fell slightly in Q1 due to strong pricing pressures and
seasonal effects, wafer volumes continued to rise. The results were closely in
line with those presented at the year end 2002 results, illustrating the
continued difficult trading conditions in the technology markets. The Group is
realising significant cost savings and these continuing efforts are resulting in
lower cash outflows, despite the lower levels of sales. The Group remains
confident that it is in a strong position in the outsource market but recognises
the protection of its cash position is paramount, so management are focussed on
growing sales, continual cost savings and working capital improvements. We
expect a significantly reduced total cash outflow in Q2, including the repayment
of approximately #0.8m of long term borrowing on relatively flat sales. The
Board continues to believe that the Group will benefit strongly as the overall
semiconductor industry recovers and will continue to strengthen its position as
the leading outsource supplier of advanced wafer products to the sector."
For further information please contact :
IQE plc +44 (0)2920 839400
Drew Nelson, (President/CEO)
Tim Hawkes (Acting CFO)
Chris Meadows (Investor Relations)
Leslie Coventry (Company Secretary)
Buchanan Communications +44 (0)2074665000
Tim Thomson/Nicola Cronk
FIRST QUARTER 2003 RESULTS
INTRODUCTION
Group sales appear to have stabilised at around the current levels, with price
declines being offset by higher volumes. In contrast, a number of other
companies in our sector have continued to experience continued significant sales
declines. We believe this is as a result of the Group increasing its share of
the outsource wafer market. We are also encouraged by the number of customers
who are indicating strongly their desire to increase outsourcing as the market
returns.
Following our earlier initiatives, actions were taken which are now bearing
fruit and these are resulting in significant cost reductions, reduced cash
outflows moving forward and a stronger competitive position. As the market
recovers, the Board continues to believe that IQE is in a strong position to be
a major beneficiary.
RESULTS
Q1/2003 sales were #4.959m, a 7% reduction on Q4/2002 due to normal Q1 seasonal
effects and 13% down on Q1/2002 mainly due to the change in US$ exchange rate,
with reductions in the telecom opto market being compensated for by the
strengthening electronics/wireless market.
The gross margin for Q1/2003 was -20% compared with -44% in Q4/2002 excluding
exceptional, non-recurring costs and -21% in Q1/2002 as a result of reduced
depreciation charges, ongoing reductions in labour costs and improvements in
operating efficiencies. The negative gross margin continues to reflect a high
(but continually reducing) proportion of the production overhead costs being
largely fixed in nature. This should improve further in Q2/2003 when the impact
of the Q1/2003 headcount reductions is realised.
Q1/2003 research and development costs were #0.659m, representing 13% of sales
(Q4/2002: #0.811m, 15%). Development is now being focussed mainly on the InGaP
HBT product for the wireless market, where short-medium term returns can be
expected as qualification with a number of customers is well underway, as well
as high power lasers for industrial applications, optical storage (DVD and CD)
and LED products. All research and development expenditure was expensed in the
quarter.
Q1/2003 SG&A costs were #1.764m, an 18% reduction on Q4/2002 and 33% down on Q1/
2002, reflecting substantial cost cutting and restructuring measures taken
throughout the Group.
As a result of the above, the Group incurred a Q1/2003 operating loss before
exceptional items (restructuring costs) and non-recurring charges of #3.420m
compared with operating losses of #5.276m in Q4/2002 and #4.977m in Q1/2002. The
restructuring costs related to the reduction in headcount, mainly in IQE Europe,
which reduced the Group headcount from 310 to 260, the beneficial impact of
which will be realised in Q2/2003. After charging net interest costs of #0.082m
and exceptional items of #0.299m, the pre tax loss for the quarter was #3.801m.
Q1/2003 capital expenditure fell to #0.070m, well below both the previous
quarter (Q4/2002: #0.576m) and the same quarter last year (Q1/2002: #1.366m).
Future capex is likely to be minimal, as the major upgrade to the operations is
complete and only maintenance capex is now required. Q1/2003 cash outflow from
operations was #3.005m (#2.706m before restructuring costs of #0.299m), down
from #3.319m in Q1/2002 on 13% lower sales but up from #0.966m in Q4/2002. Q4/
2002 benefited substantially from a working capital improvement of #2.118m and a
grant release of #0.420m. Total cash outflow for Q1/2003 was #4.217m, which
included repayment of #1.219m of long term borrowings.
Gross cash reduced to #13.497m from #17.715m at last year end.
OPERATIONS
The Group is continuing to increase its market share and feedback from customers
on the Group's broad product range and large production capability has been
positive.
IQE Inc has continued to see improving conditions in its wireless business as
customer inventories have now been largely worked through and demand for
handsets and infrastructure components is improving, one exception being a
significant contract which has been delayed due to a specification change in the
final model. However, this should resume within the next two quarters.
Internal programmes to extend efficiency improvements and achieve cost
reductions are continuing successfully, enabling the variable costs of
production to be maintained as a percentage of the sales price, a critical
achievement as the industry is experiencing significant price reduction
pressures.
Optical storage related components and High Efficiency LED market segments
remain relatively buoyant, and IQE Europe has been successfully qualifying with
Far East OEM DVD suppliers. In addition, IQE Europe's InGaP HBT product is
proving to be highly reliable and offers enhanced performance over competitors'
products. A new high power laser product is also under development and is in
qualification with key tier 1 customers. The Group is currently transitioning
products and technologies into these areas, both in the epitaxy and substrate
divisions, which should help to raise margins in future quarters as they are
brought into production.
Wafer Technology has seen a strengthening in demand for GaAs substrates for LED
applications albeit offset to some extent by price erosion. The Company's range
of narrow gap materials for longer wavelength IR applications has also continued
to be well-received to the extent that steps have been initiated to bring
additional capacity on line during the quarter. These developments, coupled
with close management of costs and inventories, has enabled the Company to
outperform the rest of the industry in continuing to trade at close to
cash-breakeven for the period.
IQE Silicon Compounds continues to develop the strained silicon product family
and supply other more standard silicon products to the wider market.
TRADING PROSPECTS
The outlook for the remainder of 2003 continues to look very challenging, with
increasing wafer volumes offset to some extent by a tight pricing environment.
As a result, sales are not expected to increase rapidly. However, the Group has
achieved a number of operational efficiencies, which have enabled IQE to offer
customers attractive pricing and to gain market share without prejudicing the
financial position of the business.
To summarise:
* We have made significant cost savings, whilst ensuring that the Group is
well positioned to respond rapidly to increased sales demands.
* We have substantially reduced SG&A costs.
* We have continued to invest in new product development, with the main focus
on products offering short to medium term paybacks.
* Our planned capacity expansion has been completed and we are capable of
producing up to #120m sales revenue through investment in the purchase,
installation and run-up of significant capital assets. As the Group
continues to increase market share, incremental sales will have a
significant positive impact on profitability and cash position.
* The Board remains confident that IQE is in a strong position within the
outsourcing market as a 'one stop shop' advanced wafer supplier. With a
large available production capacity and the necessary capital resources,
the Board believes the Group will benefit strongly as the overall
semiconductor industry recovers and will continue to strengthen its
position as the leading outsource supplier of advanced wafer products to
the sector.
* We realise the protection of our cash position is paramount. We are
focussed both on continual cost-savings and working capital reductions
along with increasing sales and reviewing strategic relationships that
could benefit the Group.
Dr Drew Nelson
President and Chief Executive Officer
IQE plc
ACCOUNTS FOR 3 MONTHS TO 31 MARCH 2003
3 months to 3 months to 12 months to
PROFIT AND LOSS ACCOUNT Note 31 Mar 2003 31 Mar 2002 31 Dec 2002
(All figures GBP000s)
Turnover 4,959 5,680 22,960
Cost of Sales (5,956) (6,895) (90,579)
Gross Profit/(Loss) (997) (1,215) (67,619)
Gross Profit/(Loss) % (20.1) (21.4) (294.5)
S G and A Costs including Distribution :
Research/Development (659) (1,142) (3,210)
Selling/General/Administration (1,764) (2,620) (10,401)
Operating Profit/(Loss) before Goodwill/Exceptionals (3,420) (4,977) (81,230)
Operating Profit/(Loss) % before Goodwill/Exceptionals (69.0) (87.6) (353.8)
Goodwill Written off 2 (0) (437) (34,302)
Exceptional Items 3 (299) (345) (2,686)
Operating Profit/(Loss) after Goodwill/Exceptionals (3,720) (5,759) (118,218)
Operating Profit/(Loss) % after Goodwill/Exceptionals (75.0) (101.4) (514.9)
Interest Received/(Paid) (82) (12) (16)
Net Profit/(Loss) before Taxes (3,801) (5,771) (118,234)
Net Profit/(Loss) % (76.7) (101.6) (515.0)
Current Taxes (0) (0) 0
Deferred Taxes (0) (0) 1,217
Dividends (0) (0) 0
Net Profit/(Loss) after Taxes (3,801) (5,771) (117,017)
Basic Earnings Pence/Share (2.05) (3.13) (63.08)
Basic Earnings Pence/Share excl Goodwill (2.05) (2.90) (44.59)
Diluted Earnings Pence/Share 4 (2.05) (3.13) (63.08)
Diluted Earnings Pence/Share excl Goodwill 4 (2.05) (2.90) (44.59)
Net Profit/(Loss) before Interest/ Taxes/Depreciation and
Amortization
(EBITDA) (3,187) (3,396) (19,537)
As At As At As At
BALANCE SHEET 31 Mar 2003 31 Mar 2002 31 Dec 2002
(All figures GBP000s)
Fixed Assets :
Intangible Fixed Assets 0 33,866 0
Tangible Fixed Assets 13,514 74,772 13,862
Investment in Own Shares 14 3 9
Capitalized Research and 0 0 0
Development
Total Fixed Assets 13,528 108,640 13,871
Current Assets :
Stocks 4,774 10,644 4,988
Debtors 3,687 6,589 3,721
Cash and Bank 13,497 27,918 17,715
Total Current Assets 21,958 45,150 26,424
Creditors Falling Due within One Year (11,302) (9,404) (11,908)
Net Current Assets 10,655 35,746 14,516
Total Assets less Current Liabilities 24,184 144,386 28,387
Creditors Falling Due after One Year :
Deferred Income (452) (141) (452)
Long Term Borrowings (5,333) (7,773) (5,999)
Provision for Liabilities and Charges :
Deferred Taxes (0) (1,215) 0
Net Assets 18,398 135,256 21,936
Capital and Reserves :
Called Up Share Capital 1,880 1,851 1,871
Merger Reserve (605) (605) (605)
Share Premium Account 140,464 140,162 140,328
Shares to be Issued 147 3 133
Retained Earnings (123,309) (8,261) (119,507)
Other Reserves (179) 2,108 (284)
Total Equity Shareholders' Funds 18,398 135,256 21,936
The financial statements were approved by the Directors of IQE plc on 20 May
2003
3 months to 3 months to 12 months to
CASH FLOW STATEMENT 31 Mar 2003 31 Mar 2002 31 Dec 2002
(All figures GBP000s)
Net Inflow/(Outflow) from Operations (3,005) (3,319) (8,995)
Returns on Investment and Servicing Finance :
Interest Received/(Paid) (82) (12) (16)
Capital Expenditures :
Purchases of Fixed Assets less (70) (1,366) (3,765)
Leases Received
Payments to Acquire Investments 0 0 0
in Subsidiaries
Capitalized Development Costs (0) (0) 0
Dividends Received/(Paid) 0 0 0
Taxes Received/(Paid) 0 (0) (67)
Net Inflow/(Outflow) before Financing (3,156) (4,698) (12,843)
Financing :
Issues of Ordinary Share Capital 158 2,950 3,267
Loans Received/(Repaid) (625) (258) (662)
Leases (Repaid) (594) (609) (2,578)
Net Inflow/(Outflow) from Financing (1,061) 2,083 27
Increase/(Decrease) in Cash and
Bank Overdrafts (4,217) (2,614) (12,816)
RECONCILIATION OF PROFIT TO CASH INFLOW/(OUTFLOW) FROM OPERATIONS 3 months to 3 months to 12 months to
31 Mar 2003 31 Mar 2002 31 Dec 2002
(All figures GBP000s)
Operating Profit after Goodwill/Exceptionals (3,720) (5,759) (118,218)
Depreciation Charged 532 1,926 64,379
Goodwill Written off 0 437 34,302
(Increase)/Decrease in Stocks 214 1,633 7,289
(Increase)/Decrease in Debtors 34 906 3,774
Increase/(Decrease) in Creditors (66) (2,431) (800)
Grants Released 0 (32) (141)
Grants Received 0 0 420
Net Cash Inflow/(Outflow) from Operations (3,005) (3,319) (8,995)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 3 months to 3 months to 12 months to
31 Mar 2003 31 Mar 2002 31 Dec 2002
(All figures GBP000s)
Increase/(Decrease) in Cash (4,217) (2,614) (12,816)
Loans (Received)/Repaid 625 258 662
Leases Repaid 594 609 2,578
Change in Funds Resulting from Cash Flows (2,998) (1,747) (9,576)
New Finance Leases (0) (376) (389)
New Loans Non Cash (0) (0) (1,315)
Net Movement (2,998) (2,123) (11,280)
Net Funds at Start 7,959 19,104 19,104
Exchange Differences (28) 19 135
Net Funds at Close 4,932 17,000 7,959
Analysis of Net Funds :
Cash and Bank 13,497 27,918 17,715
Loans Due after One Year (2,936) (2,640) (3,049)
Loans Due within One Year (551) (656) (1,035)
HP/Finance Leases Due after (2,421) (5,132) (2,950)
One Year
HP/Finance Leases Due within One Year (2,657) (2,490) (2,722)
Total 4,932 17,000 7,959
NOTES TO THE ACCOUNTS
1 BASIS OF PREPARATION
The financial information is prepared under the historical cost convention
and in accordance with applicable accounting standards, which have been
applied on a consistent basis during the period under review. The
particular accounting policies adopted are described below:
* Turnover represents amounts invoiced, exclusive of value added tax
* Tangible fixed assets are stated at cost less accumulated depreciation and
any provisions for impairment. Cost comprises all costs that are directly
attributable to bringing the asset into working condition for its intended
use, as defined by Financial Reporting Standard Number 15. Depreciation
has been calculated so as to write down the cost of assets to their
residual values over the following estimated useful economic lives.
No depreciation is provided on land or assets in the course of
construction, or on assets in periods of non-use where no physical or
technological deterioration occurs and the remaining useful economic life
is extended by the period of non-use.
Freehold buildings 25 years
Short leasehold improvements 5/27 years
Plant and machinery 5/10 years
Fixtures and fittings 4/5 years
Motor vehicles 4 years
* The financial information consolidates the financial statements of the
Company and all of its subsidiaries.
* Stocks are stated at the lower of cost and net realizable value.
* Research and development expenditure is fully written off when incurred
except where contracts of sufficient value exist or are likely to exist in
the foreseeable future, in which case it is written off over a two year
period commencing with the start of the contracts to which the costs
relate.
* Transactions in foreign currencies during the period are recorded in
sterling at the rates ruling at the dates of the transactions. Monetary
assets and liabilities in foreign currencies are translated into sterling
at the rates ruling at the balance sheet date. All exchange differences
are taken to the profit and loss account.
The balance sheets of IQE Inc are translated into sterling at the
closing rates of exchange for the period, while the profit and loss
accounts are translated into sterling at the average rates of exchange for
the period. The resulting translation differences are taken direct to
reserves.
* The Group operates defined contribution pension schemes. Contributions
are charged in the profit and loss account as they become payable in
accordance with the rules of the schemes.
* Deferred taxation is provided in full on timing differences that result
in an obligation at the balance sheet date to pay more tax, or a right to
pay less tax, at a future date at rates expected to apply when they
crystallize based on current tax rates and law. Timing differences arise
from the inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are included
in financial statements.
Deferred tax is not provided on timing differences arising from the
revaluation of fixed assets where there is no binding contract to dispose
of those assets. Deferred tax assets are recognized to the extent that it
is regarded as more likely than not that they will be recovered. Deferred
tax assets and liabilities are not discounted
* Government grants receivable in connection with expenditure on tangible
fixed assets are accounted for as deferred income, which is credited to the
profit and loss account by instalments over the expected useful economic
life of the related assets on a basis consistent with the depreciation
policy. Revenue grants for the reimbursement of costs incurred are
deducted from the costs to which they related, in the period in which the
costs are incurred.
* Assets held under finance leases and hire purchase contracts are
capitalized at their fair value on inception of the leases and depreciated
over the shorter of the period of the lease and the estimated useful
economic lives of the assets. The finance charges are allocated over the
period of the lease in proportion to the capital amount outstanding and are
charged to the profit and loss account. Operating lease rentals are
charged to the profit and loss account in equal amounts over the lease
term.
* The only derivative instruments utilized by the Group are forward exchange
contracts. The Group does not enter into speculative derivative contracts.
Forward exchange contracts are used for hedging purposes to alter the risk
profile of an existing underlying exposure of the Group in line with the
Group's risk management policies.
2 GOODWILL
The goodwill arising on the acquisition of Wafer Technology International
Limited and its subsidiary Wafer Technology Limited had been capitalized
and was being amortized over its useful life, which was considered by the
Directors to be 20 years. However, the Directors carried out an
evaluation of the investment during 2002 and, in the light of current
market conditions, considered that no goodwill existed. Accordingly, the
remaining value of goodwill was written off in full in the 2002 accounts.
3 EXCEPTIONAL ITEMS 2003 2002
Exceptional items comprise :
Restructuring costs #299K #0K
Legal fees #0K #345K
Restructuring costs relate to the cost of staff redundancies within the
Group as part of the Group's cost reduction program.
Legal fees related to a complaint lodged by IQE (Europe) against Rockwell
regarding a declaratory judgment that IQE Europe's processes did not
infringe a Rockwell-owned MOCVD patent which expired on 11 January 2000
plus claims for damages related to this matter. Rockwell counter-claimed,
alleging breaches of a licence agreement by IQE (Europe). The two parties
settled their dispute during 2002. Under the terms of the settlement, IQE
(Europe) paid Rockwell $500K and provided them with 300,000 shares in IQE
plc in return for their agreement that neither IQE (Europe) nor its
customers had infringed the MOCVD patent. A further $250K will be paid to
Rockwell during 2003 followed by a final payment of $250K during 2004. The
cost of the settlement was charged in full in the 2002 accounts
4 EARNINGS PER SHARE
FRS 14 requires the presentation of diluted EPS when a company could be
called upon to issue shares that would decrease net profit or increase net
loss per share. For a loss making company with outstanding share options,
net loss per share would only be increased by the exercise of the out of
the money options. Since it seems inappropriate to assume that options
holders would act irrationally, no adjustment has been made to diluted EPS
for out of the money share options.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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