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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
  2.30 4.21% 56.90 56.40 56.50 57.10 54.60 56.70 1,815,327 16:35:24
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Technology Hardware & Equipment 156.3 6.7 0.1 437.7 453

IQE PLC Iqe Plc: 2020 Full Year Results

25/03/2021 7:00am

UK Regulatory (RNS & others)


 
TIDMIQE 
 
 
   IQE plc 
 
   ("IQE" or the "Group") 
 
   2020 FULL YEAR RESULTS 
 
   Cardiff, UK 
 
   25 March 2021 
 
   Record revenue of GBP178m underpinned by the start of the 5G mega-cycle 
 
   IQE plc (AIM: IQE), the leading supplier of advanced wafer products and 
material solutions to the semiconductor industry, announces its full 
year results for the year ended 31 December 2020. 
 
   2020 Financials 
 
 
 
 
                                     FY 2020  FY 2019 
                                      GBP'm*   GBP'm*  Change (%) 
 
Revenue                                178.0    140.0        27.1 
 
Adjusted EBITDA                         30.1     16.2        85.8 
 
Operating loss                         (5.5)   (18.8) 
 
Adjusted operating profit/loss           5.4    (4.7) 
 
Reported loss after tax                (2.9)   (35.1) 
 
Adjusted diluted EPS(p)                0.29p  (2.46p) 
 
Net cash generated from operations      35.5      8.9       298.9 
 
Adjusted cash flow from operations      36.3     16.5       120.0 
 
Capital investment (PP&E)                5.0     31.9      (84.3) 
 
Net cash/(debt)**                        1.9   (16.0) 
 
   *   All figures GBP'm excluding adjusted diluted EPS. 
 
   ** Net (debt) / funds excludes IFRS16 lease liabilities. 
 
   Adjusted Measures: The Directors believe that the adjusted measures 
provide a more useful comparison of business trends and performance. 
Adjusted measures exclude certain non-cash items, non-operational items 
and significant infrequent items that would distort period on period 
comparability. The following highlights of the full year results is 
based on these adjusted profit measures, unless otherwise stated. 
 
   Financial Summary 
 
 
   -- Record revenue performance of GBP178.0m (FY 2019: GBP140.0m) representing 
      27% YoY revenue growth driven by the start of the 5G mega-cycle 
 
          -- Wireless revenue of GBP94.2m (FY 2019: GBP68.2m) representing 38% 
             YoY growth, driven by 5G infrastructure deployments in Asia, in 
             particular GaN on SiC for mMIMO base stations and 5G handset 
             market penetration, where there has been an increase in GaAs 
             content versus 4G phones 
 
          -- Photonics revenue of GBP81.6m (FY 2019: GBP69.8m) representing 17% 
             YoY growth, driven by continued growth in 3D Sensing and other 
             advanced sensing applications, in particular epiwafers for Direct 
             Time-of-Flight (DToF) camera modules that are enabling augmented 
             reality 
 
          -- Foreign exchange headwind of GBP0.5m (constant currency USD 
             revenue growth of 27.5% YoY) 
 
   -- Net cashflow from operations of GBP35.5m (FY 2019: GBP8.9m) resulting 
      from the strong trading performance, capital spending controls and 
      working capital management, leading to a net cash position (excluding 
      lease liabilities) of GBP1.9m as at 31 December 2020 (FY 2019: net debt 
      of GBP16m) 
 
   -- Increase in profitability with an adjusted operating profit of GBP5.4m 
      (FY 2019: GBP(4.7m) loss) as a result of revenue growth and the benefits 
      of high operational gearing 
 
   -- Reported operating loss of GBP(5.5)m (FY 2019: GBP(18.8)m) as a result of 
      exceptional impairment charges and legal costs reported at the half year, 
      offset by the proceeds from the settlement of a legal dispute resolved in 
      IQE's favour 
 
   -- Capital expenditure reduced to GBP5.0m on PP&E (FY 2019: GBP31.9m) 
      following the completion of the infrastructure phase of the Group's 
      capacity expansion in 2018 and 2019 
 
 
   Strategic and Operational Highlights 
 
 
   -- Business continuity maintained at all global sites during the COVID-19 
      pandemic with no interruptions to production 
 
   -- Consolidation of US MBE manufacturing activities at North Carolina site 
      by 2024, with transition underway 
 
   -- Acquisition of the 10% minority interest in IQE's Taiwanese subsidiary, 
      subject to an ongoing statutory Court process regarding valuation 
 
   -- Settlement in IQE's favour in a multifaceted intellectual property legal 
      dispute, resulting in $2.5m cash being received in February 2021 
 
   -- Three new Aixtron G4 tools ordered in Q1 2021 to support volume growth 
      for Wireless GaAs in Taiwan 
 
   -- Strong progress in new product development including IQepiMo(TM) template 
      technology for RF Filters, IQGeVCSEL 150(TM) technology for 6" VCSELs on 
      Germanium (Ge), a critical step in the pathway to 8" VCSEL technology, 
      and post year end IQDN-VCSEL(TM) technology for advanced sensing 
      applications at longer wavelengths on 150 mm GaAs substrates 
 
   -- The search for a new CEO who will lead IQE during the next phase of its 
      growth is ongoing. The appointment of a new CEO will facilitate Drew 
      Nelson's transition to becoming a board member with the title of 
      President. 
 
 
   Dr Drew Nelson, Chief Executive Officer of IQE, said: 
 
   "2020 was a year unlike any other and I'd like to extend my thanks to 
all of our staff who have shown their commitment and resilience in 
rising to the challenges we faced. Despite the global uncertainty that 
we encountered, the strength and diversification of our business enabled 
us to deliver record revenues of GBP178m, representing a 27% 
year-on-year increase. 
 
   At the same time, we have made positive progress against our strategy 
and recorded strong growth across our Wireless and Photonics divisions, 
despite the external pressures. 
 
   This progress, combined with the return to a cash positive position and 
the range of unique materials solutions for high performance devices in 
our development pipeline, ensures we are well placed to maintain our 
leadership position as the 5G mega-cycle gathers pace in the coming 
years". 
 
   Current trading and H1 2021 outlook 
 
   After a consistently strong year in 2020 across IQE's broad portfolio of 
products, trading has continued positively in 2021. In particular, 
revenues for Wireless GaAs epiwafers are strong as a result of continued 
5G handset market penetration and increased GaAs content. In addition, 
demand for 3D sensing, advanced sensing applications and communications 
products continues to remain positive. 
 
   IQE is well positioned for further 5G related GaN on SiC growth over the 
multi-year replacement cycle. In the first half of FY21, revenues of GaN 
on SiC are expected to be lower than in H1 FY20 amid lower market 
estimates for mMIMO deployment in Asia. Beyond the near term, the 
opportunities for this and other GaN on Si technologies are very strong 
as global roll outs of 5G gather pace. 
 
   The Group is experiencing a foreign exchange headwind in FY 21 on a 
reported basis, as the Group's revenues are predominantly earned in USD 
but are reported in GBP. 
 
   The Group expects revenue and Adjusted EBITDA in the first half of 2021 
to be similar to H1 FY20 on a constant currency basis. 
 
   Capital expenditure on PP&E for FY21 is expected to be in the range of 
GBP20m to GBP30m as the Group resumes investment in capacity for 
specific growth platforms, including three new reactors for Taiwan to 
underpin further growth in FY22. Capitalisation of development costs are 
expected to be in the range of GBP7m to GBP10m for the full year as the 
Group continues to invest 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 
 
   Drew Nelson 
 
   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) 
 
   Andy Rivett-Carnac: +44 (0) 7968 997 365 
 
   Chloe Francklin: +44 (0)78 3497 4624 
 
   Glossary 
 
 
 
 
GaAs   Gallium Arsenide 
-----  ---------------------------------------------- 
GaN    Gallium Nitride 
-----  ---------------------------------------------- 
mMIMO  Massive MIMO (Multiple-Input, Multiple Output) 
-----  ---------------------------------------------- 
SiC    Silicon Carbide 
-----  ---------------------------------------------- 
VCSEL  Vertical Cavity Surface Emitting Laser 
-----  ---------------------------------------------- 
 
   ABOUT IQE 
 
   https://www.globenewswire.com/Tracker?data=_42kLlOWgbvlRT6_P8Rh4ndARULEVTZVCtGhVzL1fVv5YMRgC7KK-YXjbfBiFUq19hu7A5ZnKd7vwS1nE2M1kRn1kStCcR1iBsyrA35YgpsS25jnth-kLr_5hxfYzM4MzbqnCagB7fFpq5YY7qtZRRQZT4dCIzbiGkNIVQK0_AzFuhsXmSEc9fKOx3WNwK50eAqldswl4E0MKXyszZFvZm-T_8hWrr9cBzpeaE9Wt5Y= 
http://iqep.com 
 
   IQE is the leading global supplier of advanced compound semiconductor 
wafers and materials solutions that enable a diverse range of 
applications across: 
 
 
   -- handset devices 
 
   -- global telecoms infrastructure 
 
   -- connected devices 
 
   -- 3D sensing 
 
 
   As a scaled global epitaxy wafer manufacturer, IQE is uniquely 
positioned in a market which has high barriers to entry. IQE supplies 
the whole market and is agnostic as to the winners and losers at chip 
and OEM level. By leveraging the Group's 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. 650 employees across nine 
manufacturing locations in the UK, US, Taiwan and Singapore, and is 
listed on the AIM Stock Exchange in London. 
 
   Financial Review 
 
   The Group reports financial performance in accordance with International 
Financial Reporting Standards adopted by the European Union ('IFRS') and 
provides disclosure of additional alternative non IFRS GAAP performance 
measures to provide further understanding of financial performance. 
Details of the alternative performance measures used by the Group 
including a reconciliation to reported IFRS GAAP performance measures is 
set out in note 5 to the financial statements. 
 
   On 11 March 2020, the World Health Organisation declared the outbreak of 
a coronavirus (COVID-19) a pandemic. The COVID-19 outbreak created 
uncertainty in global economies and posed a number of initial risks and 
uncertainties in the markets in which the Group operates although 
ultimately these have not adversely impacted financial performance 
during the year with strong global growth trends in compound 
semiconductor markets continuing and the Group experiencing little or no 
disruption to its manufacturing operations as a result of the pandemic. 
 
   The Group's trading has remained resilient throughout the year with 
significant growth experienced in a number of markets that has resulted 
in the delivery of record revenue of GBP178.0m (2019: GBP140.0m) with 
strong growth experienced in each of the Group's primary business 
segments. 
 
   The Group's Wireless business segment represents the largest proportion 
of the Group's revenue accounting for 52.9% (2019: 48.7%) of total wafer 
sales with Photonics representing 45.8% (2019: 49.8%) and CMOSS++ 
representing 1.2% (2019: 1.5%). 
 
   Wireless wafer revenues increased 38.2% to GBP94.2m (2019: GBP68.2m). 
The increase in Wireless revenue primarily reflects increased demand for 
GaAs wafers for 5G handset power amplifiers fuelled by growing end 
market demand for '5G ready' smartphones, increased demand for GaN on 
SiC wafers for 5G infrastructure related to initial deployments of 5G 
base stations and demand for high performance GaN on SiC wafers for 
advanced RF applications. 
 
   Photonics wafer revenues were up 17.0% to GBP81.6m (2019: GBP69.8m) with 
the Group experiencing consistently high demand for GaAs VCSEL wafers 
for 3D sensing applications throughout the year and continuing strong 
demand for high performance GaSb wafers for advanced sensing 
applications. 
 
   Gross profit increased from GBP21.4m to GBP33.2m. The increase in gross 
profit reflects a combination of higher trading volumes and an 
improvement in overall gross profit margin percentage to 18.6% (2019: 
15.3%) as the Group has benefited from greater capacity utilisation in 
the current year. Adjusted gross profit, which excludes the charge for 
share based payments, increased from GBP20.9m to GBP33.3m with a gross 
margin improvement from 14.9% to 18.7%. 
 
   Selling, general and administrative ('SG&A') expenses decreased from 
GBP36.3m to GBP34.7m.  Adjusted SG&A, which excludes adjustments for 
share based payments, restructuring costs, patent dispute legal costs 
and certain non-current asset impairments increased from GBP25.8m to 
GBP27.8m primarily reflecting an increase in investment in corporate 
functions and employee headcount as the Group continues to grow. 
 
   Restructuring costs totalling GBP0.16m (2019: GBP0.81m) relate to 
employee retention bonuses associated with the announced closure of the 
Group's manufacturing facility in Pennsylvania (US). Restructuring costs 
in 2019 related to site-specific employee related restructuring and 
final costs associated with the closure of the Group's manufacturing 
facility in New Jersey (US). 
 
   Patent dispute income of GBP1.7m (2019: GBP4.3m cost) relates to a 
settlement agreement associated with legal costs incurred by the Group 
that has been negotiated with the plaintiff following the previously 
announced arbitration panel ruling in favour of the Group. Patent 
dispute income also includes insurance income received from the Group's 
insurers in relation to relevant costs incurred as part of the dispute 
partially offset by actual legal costs incurred during the period. 
 
   Impairment of intangibles of GBP6.5m (2019: GBP3.8m) relates to the 
write-down in value of the Group's non-filter related cREO(TM) patent 
and development costs following the refocus of resource and investment 
into cREO(TM) filter related development activities. The onerous 
contract provision of GBP1.8m (2019: GBPnil), which is linked to the 
commercial applications of the cREO(TM) technology and represents the 
cost of minimum guaranteed future royalty payments related to the 
historical acquisition of the technology from Translucent Inc. that are 
payable in the period prior to the expected commercial exploitation of 
the cREO(TM) filter technology. 
 
   Operating loss improved from GBP18.8m in 2019 to a current year loss of 
GBP5.5m. Reflecting the adjustments noted above, adjusted operating loss 
of GBP4.7m in 2019 improved significantly in 2020 with a return to 
profitability and an adjusted operating profit of GBP5.4m. The segmental 
analysis in note 3 reflects the adjusted operating margins for the 
primary segments (before central corporate support costs). Wireless 
adjusted operating margins and photonics operating margins improved from 
9.7% and 1.9% in 2019 to 12.1% and 11.1% in 2020, primarily reflecting 
increases in volume and increased utilisation of manufacturing capacity. 
 
 
   The credit of GBP3.8m (2019: GBP4.7m charge) associated with the Group's 
share of losses in its joint venture, Compound Semiconductor Centre 
Limited, reflects the reversal of previously recognised losses as part 
of the application of the loss absorption requirement of IAS28.38 
following an equal and opposite increase in the level of impairment loss 
associated with the Group's preference share debt due from CSC. The loss 
absorption credit of GBP3.8m recorded in 'share of losses in joint 
venture' and the increased impairment charge of GBP3.8m relating to the 
preference share financial asset recorded as an 'impairment loss on 
financial assets' has no net impact on the Group's loss for the year. 
 
   Finance costs increased to GBP2.2m from GBP1.5m in 2019 reflecting a 
combination of the Group's utilisation of its bank borrowing facilities 
and the unwind of discounting associated with lease liabilities. 
 
   The tax credit of GBP1.0m (2019: GBP10.2m charge) reflects an effective 
tax rate of 25% with the credit principally arising as a result of the 
recognition of deferred tax assets for certain current year UK trading 
losses. The tax charge of GBP10.2m in 2019 primarily reflected increased 
deferred tax charges relating to the partial reversal of previously 
recognised US deferred tax assets. A forecast shift in the balance of 
the Group's projected manufacturing production, a position that remains 
unchanged in the current year, resulted in a shift in forecast profits 
between the US and rest of the world. The forecast shift in 
manufacturing and profitability in the US has restricted the Group's 
ability to recognise deferred tax assets for historical US trading 
losses and in 2019 resulted in the partial reversal of previously 
recognised US deferred tax assets with a tax impact of GBP9.6m. The 
effective tax rate of 21% (2019: 10%) applicable to the tax charge of 
GBP1.5m (2019: GBP1.8m) on adjusted items is reflective of applicable 
statutory tax rates. 
 
   The reduction in the loss for the year to GBP2.9m (2019: GBP35.1m) 
reflects a combination of significant growth in the wireless and 
photonics business segments, improved profitability within both business 
segments and a reduction in the impact of adjusted non-cash and other 
non-operational items which at an adjusted level, has resulted in a 
return to profitability, with an adjusted profit for the year of GBP2.7m 
(2019: GBP19.0m loss). 
 
   Basic and diluted loss per share has improved from a loss per share of 
4.51p to a loss of 0.41p in the current year with adjusted basic 
earnings per share of 0.29p (2019: 2.46p loss) and adjusted diluted 
earnings per share of 0.29p (2019: 2.46p loss) reflecting the Group's 
return to profitability at the adjusted profit level. 
 
   Cash generated from operating activities increased significantly in the 
year to GBP33.3m (2019: GBP8.1m) reflecting the Group's positive 
underlying trading performance and careful management of working 
capital. This increase in cash generation combined with a reduction in 
capital expenditure and technology development costs has reduced cash 
expenditure on investing activities from GBP41.8m to GBP11.8m and 
resulted in a significant strengthening in the Group's balance sheet 
position with a full year net funds position of GBP1.9m (excluding lease 
liabilities) compared to a net debt position of GBP156.0m (excluding 
lease liabilities) in 2019. 
 
   Cash expenditure as part of investing activities includes GBP1.4m of 
cash cost associated with the acquisition of the minority interest in 
the Group's Taiwanese subsidiary, IQE Taiwan ROC. On 5 October 2020, the 
group acquired the remaining 9.82% of issued shares held by third party 
minority shareholders in its subsidiary, IQE Taiwan ROC, taking its 
equity ownership from 90.18% to 100.00%. The acquisition was affected 
using a statutory share swap arrangement under Taiwan's Business Mergers 
and Acquisition Law with the final total consideration payable to be 
determined by the Taiwan Court. Consideration paid to date consists of 
GBP1.4m which has been settled via the issuance of 2,606,689 ordinary 
shares in IQE plc and cash consideration of GBP1.4m which for a minority 
of selling shareholders is subject to adjustment dependent upon a price 
determined by the Taiwan Court. 
 
   Equity shareholder funds totals GBP260.4m (2019: GBP270.4m) with the 
movement from 2019 primarily reflecting the loss for the year, the 
impact of the acquisition of the Taiwanese minority interest and adverse 
foreign exchange differences arising on the retranslation of net 
investments in overseas subsidiaries. 
 
   Financial Summary 
 
 
 
 
 
                                                    2020       2019 
                                                   GBP'000    GBP'000 
Revenue                                            178,016    140,015 
Adjusted EBITDA (see below)                         30,101     16,246 
Operating (loss) / profit 
  --Adjusted*                                        5,386    (4,676) 
  --Reported                                       (5,517)   (18,802) 
(Loss) / profit after tax 
  --Adjusted*                                        2,702   (19,010) 
  --Reported                                       (2,893)   (35,128) 
Net cash flow from operations 
  Before adjustments (note 4)                       36,324     16,530 
  Reported                                          35,457      8,948 
Free cash flow** 
  Before exceptional cash flows                     23,566   (25,445) 
  Reported                                          22,699   (33,027) 
Net (debt)/cash excluding lease liabilities***       1,923   (15,970) 
 
Equity shareholders' funds                         260,435    266,593 
Basic EPS -- adjusted****                            0.29p    (2.46p) 
Basic EPS -- unadjusted                            (0.41p)    (4.51p) 
 
Diluted EPS -- adjusted****                          0.29p    (2.46p) 
Diluted EPS -- unadjusted                          (0.41p)    (4.51p) 
-----------------------------------------------  ---------  --------- 
 
 
 
 
   Consolidated income statement for the year ended 31 December 2020 
 
 
 
 
 
                                                             2020       2019 
                                                            GBP'000    GBP'000 
-------------------------------------------------------   ---------  --------- 
Revenue                                                     178,016    140,015 
Cost of sales                                             (144,866)  (118,631) 
--------------------------------------------------------  ---------  --------- 
Gross profit                                                 33,150     21,384 
Selling, general and administrative expenses               (34,697)   (36,297) 
Impairment loss on financial assets                         (3,788)    (4,134) 
Profit on disposal of property, plant and equipment           (182)        245 
--------------------------------------------------------  ---------  --------- 
Operating loss                                              (5,517)   (18,802) 
Finance costs                                               (2,165)    (1,458) 
Reversal / share of losses of joint ventures accounted 
 for using the equity method                                  3,788    (4,688) 
Adjusted profit / (loss) before income tax                    3,221    (7,019) 
Adjustments                                                 (7,115)   (17,929) 
--------------------------------------------------------  ---------  --------- 
Loss before income tax                                      (3,894)   (24,948) 
Taxation                                                      1,001   (10,180) 
Loss for the year                                           (2,893)   (35,128) 
--------------------------------------------------------  ---------  --------- 
 
Loss attributable to: 
Equity shareholders                                         (3,271)   (35,473) 
Non-controlling interest                                        378        345 
--------------------------------------------------------  ---------  --------- 
                                                            (2,893)   (35,128) 
--------------------------------------------------------  ---------  --------- 
 
Loss per share attributable to owners of the parent 
 during the year 
Basic loss per share                                        (0.41p)    (4.51p) 
Diluted loss earnings per share                             (0.41p)    (4.51p) 
--------------------------------------------------------  ---------  --------- 
 
 
   Adjusted basic and diluted loss per share are presented in note 5. 
 
   All items included in the loss for the year relate to continuing 
operations. 
 
   Non-controlling interest relates to minority shareholder interests in 
the Group's subsidiary, IQE Taiwan ROC, prior to the acquisition of the 
minority shareholding on 5 October 2020. 
 
   Consolidated statement of comprehensive income for the year ended 31 
December 2020 
 
 
 
 
 
                                                           2020       2019 
                                                          GBP'000    GBP'000 
-----------------------------------------------------   ---------  --------- 
Loss for the year                                         (2,893)   (35,128) 
Exchange differences on translation of foreign 
 operations*                                              (6,104)    (3,654) 
Total comprehensive expense for the year                  (8,997)   (38,782) 
------------------------------------------------------  ---------  --------- 
 
Total comprehensive expense attributable to: 
Equity shareholders                                       (9,482)   (39,084) 
Non-controlling interest                                      485        302 
------------------------------------------------------  ---------  --------- 
                                                          (8,997)   (38,782) 
 -----------------------------------------------------  ---------  --------- 
 
 
   * Items that may be subsequently be reclassified to profit or loss. 
 
   Items in the statement above are disclosed net of tax. 
 
   Consolidated balance sheet as at 31 December 2020 
 
 
 
 
                                                          2020       2019 
                                                         GBP'000    GBP'000 
-----------------------------------------------------   ---------  --------- 
Non-current assets 
Intangible assets                                         105,772    118,456 
Fixed asset investments                                         -         75 
Property, plant and equipment                             126,229    136,482 
Right of use assets                                        37,339     39,355 
Deferred tax assets                                         7,821      5,679 
Other financial assets                                          -          - 
-----------------------------------------------------   ---------  --------- 
Total non-current assets                                  277,161    300,047 
------------------------------------------------------  ---------  --------- 
Current assets 
Inventories                                                30,887     30,668 
Trade and other receivables                                38,575     33,065 
Cash and cash equivalents                                  24,663      8,800 
------------------------------------------------------  ---------  --------- 
Total current assets                                       94,125     72,533 
------------------------------------------------------  ---------  --------- 
Total assets                                              371,286    372,580 
------------------------------------------------------  ---------  --------- 
Current liabilities 
Trade and other payables                                 (35,605)   (26,367) 
Current tax liabilities                                   (1,426)    (1,162) 
Bank borrowings                                           (6,201)    (2,034) 
Lease liabilities                                         (4,798)    (3,083) 
Provisions for other liabilities and charges                (515)          - 
------------------------------------------------------  ---------  --------- 
Total current liabilities                                (48,545)   (32,646) 
------------------------------------------------------  ---------  --------- 
Non-current liabilities 
Bank borrowings                                          (16,539)   (22,736) 
Lease liabilities                                        (42,226)   (44,895) 
Deferred tax liabilities                                  (2,054)    (1,860) 
Provisions for other liabilities and charges              (1,487)          - 
------------------------------------------------------  ---------  --------- 
Total non-current liabilities                            (62,306)   (69,491) 
------------------------------------------------------  ---------  --------- 
Total liabilities                                       (110,851)  (102,137) 
------------------------------------------------------  ---------  --------- 
Net assets                                                260,435    270,443 
------------------------------------------------------  ---------  --------- 
 
Equity attributable to the shareholders of the parent 
Share capital                                               8,004      7,961 
Share premium                                             154,185    152,385 
Retained earnings                                          62,089     63,826 
Exchange rate reserve                                      21,291     27,502 
Other reserves                                             14,866     14,919 
                                                          260,435    266,593 
Non-controlling interest                                        -      3,850 
------------------------------------------------------  ---------  --------- 
Total equity                                              260,435    270,443 
------------------------------------------------------  ---------  --------- 
 
 
 
 
   Consolidated statement of changes in equity for the year ended 31 
December 2020 
 
 
 
 
                                                      Exchange 
                           Share    Share   Retained    Rate     Other    Non-controlling   Total 
                          capital  premium  earnings   reserve  reserves     interests     equity 
                          GBP'000  GBP'000  GBP'000   GBP'000   GBP'000       GBP'000      GBP'000 
------------------------  -------  -------  --------  --------  --------  ---------------  ------- 
 
At 1 January 2020           7,961  152,385    63,826    27,502    14,919            3,850  270,443 
------------------------  -------  -------  --------  --------  --------  ---------------  ------- 
 
  Comprehensive expense 
(Loss) / profit for the 
 year                           -        -   (3,271)         -         -              378  (2,893) 
Other comprehensive 
 expense for the year           -        -         -   (6,211)         -              107  (6,104) 
Total comprehensive 
 expense for the year           -        -   (3,271)   (6,211)         -              485  (8,997) 
Transactions with owners 
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 
------------------------  -------  -------  --------  --------  --------  ---------------  ------- 
 
 
 
 
 
 
                                                      Exchange 
                           Share    Share   Retained      rate     Other  Non-controlling   Total 
                          capital  premium  earnings   reserve  reserves     interests      equity 
                          GBP'000  GBP'000  GBP'000    GBP'000   GBP'000      GBP'000      GBP'000 
------------------------  -------  -------  --------  --------  --------  ---------------  -------- 
 
At 1 January 2019           7,767  151,147    99,299    31,113    16,404            3,548   309,278 
------------------------  -------  -------  --------  --------  --------  ---------------  -------- 
 
  Comprehensive expense 
(Loss) / profit for the 
 year                           -        -  (35,473)         -         -              345  (35,128) 
Other comprehensive 
 expense for the year           -        -         -   (3,611)         -             (43)   (3,654) 
Total comprehensive 
 expense for the year           -        -  (35,473)   (3,611)         -              302  (38,782) 
Transactions with owners 
Share based payments            -        -         -         -     (641)                -     (641) 
Tax relating to share 
 options                        -        -         -         -     (124)                -     (124) 
Proceeds from shares 
 issued                       194    1,238         -         -     (720)                -       712 
------------------------  -------  -------  --------  --------  --------  ---------------  -------- 
Total transactions with 
 owners                       194    1,238         -         -   (1,485)                -      (53) 
 
At 31 December 2019         7,961  152,385    63,826    27,502    14,919            3,850   270,443 
------------------------  -------  -------  --------  --------  --------  ---------------  -------- 
 
 
   Other reserves relates to share based payments. 
 
   Consolidated cash flow statement for the year ended 31 December 2020 
 
 
 
 
                                                            2020      2019 
                                                           GBP'000   GBP'000 
-------------------------------------------------------   --------  -------- 
Cash flows from operating activities 
-------------------------------------------------------   --------  -------- 
Adjusted cash inflow from operations                        36,324    16,530 
Cash impact of adjustments                                   (867)   (7,582) 
--------------------------------------------------------  --------  -------- 
Cash generated from operations                              35,457     8,948 
Net interest paid                                          (1,142)     (671) 
Income tax paid                                              (993)     (151) 
--------------------------------------------------------  --------  -------- 
Net cash generated from operating activities                33,322     8,126 
--------------------------------------------------------  --------  -------- 
Cash flows from investing activities 
Purchase of property, plant and equipment                  (4,993)  (31,864) 
Purchase of intangible assets                                (731)   (1,806) 
Capitalised development expenditure                        (4,678)   (8,427) 
Proceeds from disposal of property, plant and equipment          -       263 
Acquisition of minority interest                           (1,363)         - 
Acquisition of subsidiary, net of cash acquired                  -        10 
Net cash used in investing activities                     (11,765)  (41,824) 
--------------------------------------------------------  --------  -------- 
Cash flows from financing activities 
Proceeds from issuance of ordinary shares                      240       712 
Proceeds from borrowings                                     5,000    41,895 
Repayment of borrowings                                    (7,030)  (17,125) 
Payment of lease liabilities                               (3,764)   (3,651) 
Net cash (used) / generated from financing activities      (5,554)    21,831 
--------------------------------------------------------  --------  -------- 
Net increase / (decrease) in cash and cash equivalents      16,003  (11,867) 
Cash and cash equivalents at 1 January                       8,800    20,807 
Exchange losses on cash and cash equivalents                 (140)     (140) 
--------------------------------------------------------  --------  -------- 
Cash and cash equivalents at 31 December                    24,663     8,800 
--------------------------------------------------------  --------  -------- 
 
 
 
 
   Notes to the financial statements for the year ended 31 December 2020 
 
   1.     General information 
 
   IQE plc ('the company') and its subsidiaries (together 'the Group') 
develop, manufacture and sell advanced semiconductor materials. The 
Group has manufacturing facilities in Europe, United States of America 
and Asia and sells to customers located globally. 
 
   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). The 
address of the Company's registered office is Pascal Close, St Mellons, 
Cardiff, CF3 0LW. 
 
 
   1. Basis of preparation and significant accounting policies 
 
 
   2.1   Basis of preparation 
 
   The financial information set out in the announcement does not 
constitute the Group's statutory accounts for the year ended 31 December 
2020 or 31 December 2019. Statutory accounts for 2019 have been 
delivered to the registrar of companies, and those for 2020 will be 
delivered in due course. The auditor has reported on those accounts and 
their report was (i) unqualified, (ii) did not include references to any 
matters to which the auditors drew attention by way of emphasis without 
qualifying their report and (iii) did not contain statements under 
section 498 (2) or (3) of the Companies Act 2006. 
 
   The financial statements have been prepared and approved by the 
directors in accordance with international accounting standards in 
conformity with the requirements of the Companies Act 2006 ("Adopted 
IFRSs"). The financial statements have been prepared under the 
historical cost convention except where fair value measurement is 
required by IFRS the accounting policies have been consistently applied 
to all years presented. 
 
   2.2   Going concern 
 
   The Group made a loss of GBP2,893,000 (2019: GBP35,128,000 loss) but had 
an increase in cash and cash equivalents of GBP15,863,000 (2019: 
GBP12,007,000 decrease) for the year ended 31 December 2020. 
 
   On 11 March 2020, the World Health Organisation declared the outbreak of 
a coronavirus (COVID-19) a pandemic. The COVID-19 outbreak continues to 
create uncertainty in global economies and the markets in which the 
Group operates which pose risks to the Group's continuity of business 
operations, demand for its products and its forecast future financial 
performance given current world health and global economic conditions. 
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's operations are geographically diversified. Manufacturing 
      operations are located at ten different sites across three continents, 
      significantly lessening the impact of potential disruption at any single 
      site as a result of the ongoing Coronavirus pandemic. All manufacturing 
      sites continue to remain operational and production has not been affected 
      by any disruption at any of the Group's global sites. 
 
   -- The Group dual or multi-sources key raw materials (substrates, gases, 
      spares and consumables) wherever possible, from a broad range of global 
      suppliers, reducing the likelihood of potential disruption to production 
      from any single supplier. The Group works closely with suppliers and 
      customers to manage inventory levels in order to create supply chain 
      resilience against potential disruption. All manufacturing sites continue 
      to remain operational and production has not been affected by any supply 
      chain disruption. 
 
   -- The Group's trading has remained resilient throughout the year with 
      significant growth experienced in a number of markets that has resulted 
      in the delivery of record revenue of GBP178,016,000 (2019: 
      GBP140,015,000) and an increase in adjusted profit before tax to 
      GBP3,221,000 (2019: GBP7,019,000 loss). 
 
   -- Net debt (excluding lease liabilities) has significantly reduced with the 
      group ending the financial year in a net funds (excluding lease 
      liabilities) position of GBP1,923,000 (2019: GBP15,970,000 net debt) as a 
      result of a combination of increased cash generated from operations and a 
      reduction in capital expenditure following the completion of the 
      infrastructure phase of the Group's expansion in Massachusetts USA, 
      Hsinchu Taiwan and at its Newport Foundry in South Wales. Net funds 
      (excluding lease liabilities) consists of GBP24,663,000 (2019: 
      GBP8,800,000) of cash net of bank loans of GBP22,740,000 (2019: 
      GBP24,770,000) repayable over a period to 29 August 2024. 
 
   -- On 24 January 2019, the Group agreed a GBP25,735,000 ($35,000,000) 
      three-year multi-currency revolving credit facility from HSBC Bank plc 
      which is undrawn. The Group has complied with all covenants associated 
      with the facility. 
 
   -- On 29 August 2019, the Group agreed a GBP30,000,000 five-year Asset 
      Finance Loan facility from HSBC Bank of which GBP25,000,000 has been 
      drawn. The Group has complied with all covenants associated with the 
      facility. 
 
   -- On 10 December 2020, the Group agreed the extension of the relaxation of 
      certain banking covenants applicable at 31 December 2020 and 30 June 2021 
      to include 31 December 2021 as an on-going precautionary measure designed 
      to increase covenant headroom and availability of cash funding under the 
      terms of the Group's committed bank facilities. 
 
   -- The Group generated cash from operating activities of GBP33,322,000 
      (2019: GBP8,126,000) and its financial forecasts for the period up to and 
      including 31 December 2022 show that the Group is forecast to continue to 
      comply with its banking covenants and has adequate cash resources to 
      continue operating for the foreseeable future. 
 
   -- The Group's trading has remained resilient throughout the year with 
      significant growth experienced in a number of markets with record revenue 
      of GBP178,016,000 (2019: GBP140,015,000) and strong growth delivered in 
      each of the Group's primary business segments. Wireless and Photonics 
      growth drivers, which include increased demand for GaAs wafers for 5G 
      smartphone power amplifiers, GaN on SiC wafers for 5G infrastructure and 
      advanced RF applications, VCSEL wafers for 3D sensing applications and 
      GaSb wafers for infrared applications, continue to remain strong and 
      trading in Q1 2021 remains favourable with positive momentum continuing 
      across the Group's Wireless and Photonics business units. 
 
   -- The Group's severe but plausible downside financial forecasts have been 
      prepared with significant reductions to future forecast revenues, 
      designed to reflect severe downside scenarios associated with demand 
      risks, for a 24-month period to 31 December 2022. The severe but 
      plausible downside scenario, applied to the Group's financial forecasts, 
      which take account of current trading and customer demand, assumes a 10% 
      reduction in 2021 revenue and a 22% reduction in 2022 revenue partially 
      offset by mitigations within the control of the company, including 
      deferred investment in employee related costs across the forecast period 
      and certain capital expenditure mitigations in 2022. The severe but 
      plausible downside scenario illustrates that the Group is forecast to 
      continue to comply with its banking covenants but would require either 
      the extension, or refinancing of its current revolving credit facility 
      from HSBC Bank plc on expiry in January 2022. The severe but plausible 
      downside scenario illustrates that a facility of GBP9,000,000, 
      significantly below the Group's current committed facility of 
      GBP25,735,000 could be required in 2022.  The Group has a long-standing 
      and trusted relationship with its bankers, HSBC Bank plc, who remain 
      supportive and who have, at the date of this report, extended formal 
      credit approved heads of terms for a one-year extension of the Group's 
      GBP25,735,000 ($35,000,000) revolving credit facility until January 2023. 
      The credit approved heads of terms include banking covenants consistent 
      with the covenant arrangements applicable until expiry of the existing 
      facility. On this basis, the directors believe that the group has, or 
      will have access, to adequate cash resources to continue operating for 
      the foreseeable future even in a severe but plausible downside scenario. 
 
 
   The Group meets its day-to-day working capital and other cash 
requirements through its bank facilities and available cash. The Group's 
cash flow forecasts and projections, in conjunction with the level of 
assessed covenant headroom on the Group's committed bank facilities show 
that the Group and the Company have 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 consolidated financial statement. 
 
 
   1. Changes in accounting policy and disclosures 
 
   2. New standards, amendments and interpretations. 
 
 
   The following new standards, amendments and interpretations have been 
adopted by the Group for the first time for the financial year beginning 
on 1 January 2020: 
 
 
   -- Amendments to IFRS 9 'Financial Instruments', IAS 39 'Financial 
      Instruments: Recognition and Measurement' and IFRS 7 'Financial 
      Instruments: Disclosures' to provide certain reliefs, including in 
      relation to hedge accounting, arising from issues related to interest 
      rate benchmark reform. 
 
   -- Amendments to IFRS 3 'Business Combinations' which clarifies the 
      definition of a business. 
 
   -- Amendments to IAS 1 'Presentation of financial statements' and IAS 8 
      'Accounting policies, changes in accounting estimates and errors' which 
      are intended to make the definition of material easier to understand. 
 
   -- Amendments to references to the 'Conceptual framework' in IFRS standards. 
 
 
   The adoption of these standards, amendments and interpretations has not 
had a material impact on the financial statements of the Group or parent 
company. 
 
   (b) New standards, amendments and interpretations issued but not 
effective and not adopted early 
 
   A number of new standards, amendments to standards and interpretations 
which are set out below are effective for annual periods beginning after 
1 January 2020 and have not been applied in preparing these consolidated 
financial statements. 
 
 
   -- Amendment to IFRS 3 'Business combinations' to update references to the 
      Conceptual Framework for Financial Reporting without changing the 
      accounting requirements for business combinations. 
 
   -- Amendments to IFRS 9 'Financial Instruments', IAS 39 'Financial 
      Instruments: Recognition and Measurement', IFRS 7 'Financial Instruments: 
      Disclosures, IFRS 4 'Insurance Contracts', IFRS 16 'Leases' related to 
      interest rate benchmark reform (phase two) and the issues that arise from 
      the implementation of the reforms, including the replacement of one 
      benchmark with an alternative one. 
 
   -- Amendment to IFRS 16 'Leases' which provides an optional practical 
      expedient for lessees from assessing whether a rent concession related to 
      COVID-19 is a lease modification. 
 
   -- IFRS 17 'Insurance contracts' which establishes the principles for the 
      recognition, measurement, presentation and disclosure of insurance 
      contracts and supersedes IFRS 4 'Insurance Contracts' 
 
   -- Amendments to IAS 1 'Presentation of financial statements' on 
      classification of liabilities which is intended to clarify that 
      liabilities are classified as either current or non-current depending 
      upon the rights that exist at the end of the reporting period. 
 
   -- Amendments to IAS 16 'Property, plant and equipment' to prohibit the 
      deduction from cost of property, plant and equipment amounts received 
      from selling items produced while preparing the asset for its intended 
      use with any such sales and related cost recognised in profit or loss. 
 
   -- Amendments to IAS 37 'Provisions, contingent liabilities and contingent 
      assets' to specify which costs a company includes when assessing whether 
      a contract will be loss making. 
 
   -- Annual improvements to make minor amendments to IFRS 1 'First-time 
      adoption of IFRS', IFRS 9 'Financial Instruments', IAS 41 'Agriculture' 
      and amendments to the illustrative examples accompanying IFRS 16 
      'Leases'. 
 
 
   The Directors anticipate that at the time of this report none of the new 
standards, amendments to standards and interpretations are expected to 
have a material effect on the financial statements of the Group or 
parent company. 
 
   3.         Segmental analysis 
 
   3.1 Description of segments and principal activities 
 
   The Chief Operating Decision Maker is defined as the Executive 
Management Board. The Executive Management Board, consisting of the 
Chief Executive Officer, Chief Financial Officer, Chief Operations 
Officer, Chief Technology Officer, Executive VP Global Business 
Development, Wireless and Emerging Products and Executive VP Global 
Business Development, Photonics & Infrared consider the group's 
performance from a product perspective and have identified three primary 
reportable segments: 
 
 
   -- Wireless -- this part of the business manufactures and sells compound 
      semiconductor material for the wireless market which includes radio 
      frequency devices that enable wireless communications. 
 
   -- Photonics -- this part of the business manufactures and sells compound 
      semiconductor material for the photonics market which includes 
      applications that either transmit or sense light, both visible and 
      infrared. 
 
   -- CMOSS++ - this part of the business manufactures and sells advanced 
      semiconductor materials related to silicon which include the combination 
      of the advanced properties of compound semiconductors with those of lower 
      cost of silicon technologies. 
 
 
   The Executive Management Board primarily use revenue and a measure of 
adjusted operating profit to assess the performance of the operating 
segments. Measures of total assets and liabilities for each reportable 
segment are not reported to the Executive Management Board and therefore 
have not been disclosed. 
 
 
 
 
                                                               2020      2019 
Revenue                                                      GBP'000   GBP'000 
-------------------------------------------------------      --------  -------- 
Wireless                                                       94,193    68,166 
Photonics                                                      81,627    69,758 
CMOS++                                                          2,196     2,091 
Revenue                                                       178,016   140,015 
-------------------------------------------------------      --------  -------- 
 
Adjusted operating profit / (loss) 
Wireless                                                       11,393     6,590 
Photonics                                                       9,080     1,324 
CMOS++                                                          (714)   (1,304) 
Central corporate costs                                      (14,373)  (11,286) 
Adjusted operating profit / (loss)                              5,386   (4,676) 
 
Adjusted items (see note 4)                                  (10,903)  (14,126) 
Operating loss                                                (5,517)  (18,802) 
 
Reversal / share of losses of joint venture accounted 
for using the equity method                                     3,788   (4,688) 
Finance costs                                                 (2,165)   (1,458) 
Loss before tax                                               (3,894)  (24,948) 
-------------------------------------------------------      --------  -------- 
 
 
   4.                 Adjusted profit measures 
 
   The Group's 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 Group's reported financial 
performance. 
 
 
 
 
                                        2020                            2019 
               Adjusted  Adjusted  Reported   Adjusted   Adjusted  Reported 
                Results    Items    Results    Results     Items    Results 
                GBP'000   GBP'000   GBP'000    GBP'000    GBP'000   GBP'000 
------------  ---------  --------  ---------  ---------  --------  --------- 
Revenue         178,016         -    178,016    140,015         -    140,015 
Cost of 
 sales        (144,689)     (177)  (144,866)  (119,145)       514  (118,631) 
------------  ---------  --------  ---------  ---------  --------  --------- 
Gross profit     33,327     (177)     33,150     20,870       514     21,384 
Other income          -         -          -          -         -          - 
SG&A           (27,759)   (6,938)   (34,697)   (25,791)  (10,506)   (36,297) 
Impairment 
 loss on 
 financial 
 assets               -   (3,788)    (3,788)          -   (4,134)    (4,134) 
Profit on 
 disposal of 
 PPE              (182)         -      (182)        245         -        245 
------------  ---------  --------  ---------  ---------  --------  --------- 
Operating 
 profit / 
 (loss)           5,386  (10,903)    (5,517)    (4,676)  (14,126)   (18,802) 
Reversal / 
 share of JV 
 losses               -     3,788      3,788      (737)   (3,951)    (4,688) 
Finance 
 costs          (2,165)         -    (2,165)    (1,606)       148    (1,458) 
------------  ---------  --------  ---------  ---------  --------  --------- 
Profit / 
 (loss) 
 before tax       3,221   (7,115)    (3,894)    (7,019)  (17,929)   (24,948) 
Taxation          (519)     1,520      1,001   (11,991)     1,811   (10,180) 
Profit / 
 (loss) for 
 the period       2,702   (5,595)    (2,893)   (19,010)  (16,118)   (35,128) 
------------  ---------  --------  ---------  ---------  --------  --------- 
 
 
 
 
 
 
                             2020                                           2019 
                  Pre-tax      Tax     Adjusted    Pre-tax      Tax     Adjusted 
                 Adjustment   Impact    Results   Adjustment   Impact    Results 
                  GBP'000     GBP'000   GBP'000    GBP'000     GBP'000   GBP'000 
--------------  -----------  --------  --------  -----------  --------  -------- 
Share based 
 payments             (265)       210      (55)          771       133       904 
Amortisation 
 of acquired 
 intangibles              -         -         -        (385)        81     (304) 
Restructuring         (162)        39     (123)        (813)       164     (649) 
Patent dispute 
 legal fees           1,689     (321)     1,368      (4,308)       775   (3,533) 
Impairment -- 
 intangibles        (6,537)     1,242   (5,295)      (3,805)       685   (3,120) 
Onerous 
 contract           (1,840)       350   (1,490)            -         -         - 
Impairment -- 
 ROU asset                -         -         -      (1,623)         -   (1,623) 
Impairment -- 
 financial 
 assets             (3,788)         -   (3,788)      (4,134)         -   (4,134) 
Share of JV 
 losses -- 
 financial 
 asset                3,788         -     3,788      (3,951)         -   (3,951) 
CSDC 
 acquisition - 
 negative 
 goodwill                 -         -         -          171         -       171 
Discounting               -         -         -          148      (27)       121 
Total               (7,115)     1,520   (5,595)     (17,929)     1,811  (16,118) 
--------------  -----------  --------  --------  -----------  --------  -------- 
 
 
   The nature of the adjusted items is as follows: 
 
 
   -- Share based payments -- The charge (2019: credit) recorded in accordance 
      with IFRS 2 'Share based payment' of which GBP177,000 (2019: GBP514,000 
      credit) has been classified within cost of sales in gross profit and 
      GBP88,000 (2019: GBP257,000 credit) has been classified as selling, 
      general and administrative expenses in operating profit. GBPnil cash has 
      been defrayed in the year (2019: GBP1,331,000) in respect of employer 
      social security contributions following the exercise of unapproved 
      employee share options. 
 
   -- Amortisation of acquired intangibles - The charge of GBPnil (2019: 
      GBP385,000) relates to the amortisation of acquired intangibles arising 
      in respect of fair value exercises associated with previous corporate 
      acquisitions and has been classified as selling, general and 
      administrative expenses within operating profit and is non-cash. 
 
   -- Restructuring -- The charge of GBP162,000 relates to employee retention 
      bonus costs relating to the announced closure of the Group's 
      manufacturing facility in Pennsylvania, USA. The charge was classified as 
      selling, general and administrative expenses within operating loss. Cash 
      costs defrayed in the year total GBPnil. 
 
 
   The 2019 charge of GBP813,000 relates to the closure of the Group's 
manufacturing facility in New Jersey, USA at a cost of GBP226,000 and 
site-specific restructuring and employee severance costs of GBP587,000. 
The charge was classified as selling, general and administrative 
expenses within operating loss. Cash costs of GBP1,947,000 related to 
severance and reactor decommissioning costs of GBP1,360,000 associated 
with the closure of the New Jersey site and cash costs of GBP587,000 
associated with site specific employee severance costs. 
 
 
   -- Patent dispute legal costs -- The credit relates to a settlement 
      agreement of GBP1,825,000 (US$2,500,000) associated with legal costs 
      incurred by the Group that has been negotiated with the plaintiff 
      following an arbitration panel ruling in favour of the Group on 17 
      January 2020. The settlement has been cash received in the post balance 
      sheet period. The credit also includes an increase in insurance income of 
      GBP410,000 (2019: GBPnil) following final settlement with the Group's 
      insurers partially offset by legal costs incurred during the year of 
      GBP546,000 (2019: GBP4,308,000). Cash cost, net of the full insurance 
      receipt of GBP740,000 ($1,000,000) total GBP867,000 as a result of the 
      payment of current and prior period legal costs during the year of 
      GBP1,607,000 (2019: GBP4,304,000). 
 
   -- Impairment of intangibles -- The non-cash charge of GBP6,537,000 (2019: 
      GBP3,805,000) relates to the impairment of the Group's non-filter related 
      cREO(TM) patent and development costs resulting from a lack of current 
      intent to continue relevant development activities following the refocus 
      of resource and investment into cREO(TM) filter related development 
      activities. The non-cash charge in 2019 related to the impairment of 
      certain development costs, patent costs and software where the Group took 
      the decision to either discontinue using the asset or discontinue the 
      relevant technology development activities. 
 
   -- Onerous contract -- The onerous contract provision of GBP1,840,000 (2019: 
      GBPnil) is non-cash in the current period and represents the cost of 
      minimum guaranteed future royalty payments associated with the use of 
      cREO(TM) technology acquired from Translucent Inc. 
 
   -- Impairment of right of use asset -- The non-cash charge of GBPnil (2019: 
      GBP1,623,000) relates to the impairment of the right of use asset 
      relating to space at the Singapore manufacturing site sub-let by Compound 
      Semiconductor Development Centre Limited, the Group's former joint 
      venture that was acquired during 2019. The charge was classified as 
      selling, general and administrative expenses within operating loss. 
 
   -- Impairment of financial asset -- The non-cash charge of GBP3,788,000 
      (2019: GBP4,134,000) relates to the increase in the expected credit loss 
      associated with the Group's preference share financial asset due from its 
      joint venture, CSC. 
 
   -- Reversal / share of joint venture losses (financial asset) - The Group 
      treats its preference share financial assets due from its joint venture, 
      CSC, as a long-term interest in an equity accounted investee and is 
      required to apply the loss absorption requirements of IAS 28.38 to the 
      carrying amount of the preference share financial asset, after the 
      application of any expected credit losses as described above and in note 
      3.8. Application of the loss absorption requirements following the 
      increase in expected credit losses has resulted in the reversal of the 
      Group's share of previously allocated joint venture losses to the 
      preference share financial asset resulting in a non-cash credit of 
      GBP3,788,000 (2019: GBP3,951,000 charge) which has been recognised within 
      'share of losses of joint ventures accounted for using the equity method' 
      in the Consolidated Income Statement. 
 
   -- CSDC acquisition negative goodwill -- The non-cash credit of GBPnil 
      (2019: GBP171,000) relates to the negative goodwill arising on the 
      Group's acquisition of its former joint venture, Compound Semiconductor 
      Centre Limited (see note 31). The credit was classified as selling, 
      general and administrative expenses within operating loss. 
 
   -- Discounting -- This relates to the unwind of discounting on long term 
      financial assets of GBPnil (2019: GBP148,000). Discounting is non-cash 
      and has been classified as finance costs within profit before tax. 
 
 
   The cash impact of adjusted items in the consolidated cash flow 
statement represents the cash costs defrayed in 2020 in respect of 
patent dispute legal costs, net of insurance income received in respect 
of patent legal costs totalling GBP867,000. 
 
   Adjusted EBITDA (adjusted earnings before interest, tax, depreciation 
and amortisation) is calculated as follows: 
 
 
 
 
                                                           2020      2019 
                                                        GBP'000   GBP'000 
 ------------------------------------------------  ------------  -------- 
 
Loss attributable to equity shareholders                (3,271)  (35,473) 
Non-controlling interest                                    378       345 
Finance costs                                             2,165     1,458 
Tax                                                     (1,001)    10,180 
Depreciation of property, plant and equipment            12,983    10,477 
Depreciation of right of use assets                       3,681     3,590 
Amortisation of intangible fixed assets                   7,869     8,222 
Loss/(profit) on disposal of PPE                            182     (245) 
Share based payments                                        265     (771) 
Adjusted Items                                            6,850    18,463 
------------------------------------------------  ---  --------  -------- 
Restructuring                                               162       813 
Patent dispute settlement and legal costs               (1,689)     4,308 
Impairment of intangibles                                 6,537     3,805 
Onerous contract provision                                1,840         - 
Impairment of right of use asset                              -     1,623 
Impairment of financial asset                             3,788     4,134 
Share of joint venture losses (financial asset)         (3,788)     3,951 
CSDC acquisition negative goodwill                            -     (171) 
Adjusted EBITDA                                          30,101    16,246 
------------------------------------------------  ---  --------  -------- 
 
 
   5.         Loss per share 
 
   Basic loss per share is calculated by dividing the loss attributable to 
ordinary shareholders by the weighted average number of ordinary shares 
in issue during the year. 
 
   Diluted loss per share is calculated by dividing the loss attributable 
to ordinary shareholders by the weighted average number of shares and 
the dilutive effect of '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 year. 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. 
 
   The directors also present an adjusted earnings per share measure which 
eliminates certain adjusted items in order to provide a more meaningful 
measure of underlying profit.  The adjustments are detailed in note 4. 
 
 
 
 
                                                         2020         2019 
                                                        GBP'000      GBP'000 
----------------------------------------------------  -----------  ----------- 
Loss attributable to ordinary shareholders                (3,271)     (35,473) 
Adjustments to loss after tax (note 4)                      5,595       16,118 
Adjusted profit / (loss) attributable to ordinary 
 shareholders                                               2,324     (19,355) 
----------------------------------------------------  -----------  ----------- 
 
                                                             2020         2019 
                                                           Number       Number 
----------------------------------------------------  -----------  ----------- 
 
Weighted average number of ordinary shares            797,228,579  787,175,574 
Dilutive share options                                 11,395,298   13,562,165 
----------------------------------------------------  -----------  ----------- 
Adjusted weighted average number of ordinary shares   808,623,877  800,737,739 
 
Adjusted basic loss per share                               0.29p      (2.46p) 
Basic loss per share                                      (0.41p)      (4.51p) 
 
Adjusted diluted loss per share                             0.29p      (2.46p) 
Diluted loss per share                                    (0.41p)      (4.51p) 
----------------------------------------------------  -----------  ----------- 
 
 
   6.         Cash generated from operations 
 
 
 
 
                                                          2020      2019 
  Group                                                  GBP'000   GBP'000 
------------------------------------------------------  --------  -------- 
 
Loss before tax                                          (3,894)  (24,948) 
Finance costs                                              2,165     1,458 
Depreciation of property, plant and equipment             12,983    10,477 
Depreciation of right of use assets                        3,681     3,590 
Amortisation of intangible assets                          7,869     8,222 
Impairment of intangible assets                            6,537     3,805 
Impairment of right of use assets                              -     1,623 
Impairment of financial assets                             3,788     4,134 
Share of joint venture                                   (3,788)     3,951 
Inventory write downs (note 17)                            3,025     3,219 
Loss / (profit) on disposal of fixed assets                  182     (245) 
CSDC acquisition negative goodwill                             -     (171) 
Non-cash provision movements                               2,002         - 
Share based payments                                         265     (771) 
------------------------------------------------------  --------  -------- 
Cash inflow from operations before changes in working 
 capital                                                  34,815    14,344 
 
(Increase) / decrease in inventories                     (4,128)     2,184 
(Increase) / decrease in trade and other receivables     (7,151)     4,130 
Increase / (decrease) in trade and other payables         11,921  (11,710) 
------------------------------------------------------  --------  -------- 
Cash inflow from operations                               35,457     8,948 
------------------------------------------------------  --------  -------- 
 
 
 
 
 
 

(END) Dow Jones Newswires

March 25, 2021 03:00 ET (07:00 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.

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