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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.55 | 1.93% | 29.00 | 28.10 | 28.40 | 29.00 | 29.00 | 29.00 | 21,270 | 08:16:35 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Electronic Components, Nec | 167.49M | -74.54M | -0.0775 | -3.67 | 273.55M |
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TIDMIQE
IQE plc
("IQE" or the "Group")
2020 Half Year Results
Record revenue performance and strong cash conversion
Cardiff, UK
8 September 2020
IQE plc (AIM: IQE) the leading supplier of advanced wafer products and
material solutions to the semiconductor industry, announces its results
for the six months ending 30 June 2020.
Financial Highlights
H1 2020 H1 2019 Change
GBP'm* GBP'm* (%)
Revenue 89.9 66.7 35%
Adjusted EBITDA** 16.3 7.4 120%
Operating loss (5.0) (3.1)
Adjusted operating profit / (loss) 4.3 (1.9)
Reported loss before tax (6.2) (3.7)
Reported loss after tax (5.0) (10.7)
Diluted EPS (0.66p) (1.38p)
Adjusted Diluted EPS 0.28p (1.29p)
Cash generated from operations 15.1 4.0 278%
Adjusted cash inflow from operations 16.2 6.7 141%
Capital Investment (PP&E) 1.1 19.1 (94%)
Net Debt*** (7.4) (0.8)
* All figures GBP'm excluding diluted and adjusted diluted EPS
** Adjusted Measures: Alternative performance measures are disclosed
separately after a number of adjusted non-cash, one-off or
non-operational items where it is deemed necessary by the Directors to
do so to provide further understanding of the financial performance of
the Group. Adjusted items are material items of income or expense that
have been shown separately due to the significance of their nature or
amount as detailed in note 8.
*** Net debt excludes IFRS16 lease liabilities
The following highlights of the first half results is based on these
adjusted profit measures, unless otherwise stated.
Financial Highlights
-- Revenue of GBP89.9m (HY 2019: GBP66.7m) representing 35% year-on-year
growth and a record first half revenue performance for the Group,
including an FX tailwind of GBP2.5m
-- Adjusted operating profit of GBP4.3m (HY 2019: loss GBP1.9m) representing
a return to profitability driven by additional volume against the Group's
high operational gearing
-- Adjusted cash inflow from operations of GBP16.2m (H1 2019: GBP6.7m)
representing c.100% Adj EBITDA conversion
-- Strong liquidity with a net debt of GBP7.4m, which has reduced by almost
GBP9m since year end FY19 as a result of the strong operating cash
generation and lower levels of capital investment
-- Reported operating loss of GBP5.0m primarily as a result of the non-cash
write down of certain development intangibles, patents and recognition of
an onerous contract provision, related to cREO technologies
Operational Highlights
-- Wireless return to growth
-- Over 50% year-on-year growth in H1 FY20
-- Strength in wafers for Power Amplifiers driven by 5G handset
demand
-- Significant growth in GaN on SiC wafers for antenna elements
deployed in 5G infrastructure roll-outs
-- Photonics update
-- Over 20% year-on-year growth in H1 FY20
-- Continued growth in existing major supply chain for 3D sensing
driven by content gain
-- Strong demand for lasers for communications and industrial
applications, and IR sensors for aerospace and military
applications
-- Resilience during a Global Pandemic
-- Continuous production at all of IQE's global sites throughout the
period
-- Strong underlying demand in IQE's markets, with telecommunications
and connectivity increasingly important at a time of social
distancing and remote working
-- Continued progress in operations
-- Continued focus and improvement in productivity and yield in key
Group manufacturing sites, contributing to Gross Profit
improvements
-- Decision taken to close the Pennsylvania site and consolidate US
MBE activities in the North Carolina site by 2024 communicated to
staff and customers post half year end
-- Decision to focus cREO development on filters and pause other cREO
development due to re-assessed timing of anticipated revenue
streams for the technology
Dr Drew Nelson, Chief Executive Officer of IQE, said:
"I am very proud of the results that IQE has achieved in the first half
of 2020, particularly given the uncertain external environment. Building
on our investments in our products, our people and our infrastructure,
we have demonstrated both financial and operational resilience and have
delivered record H1 revenues.
However, our priority has been to ensure all our colleagues are safe
during this unprecedented time, and I would like to take this
opportunity to thank our dedicated staff who successfully maintained
operations at all of our global sites despite the challenges posed by
the global pandemic.
IQE remains focused on executing our technology roadmap, and we are
confident this momentum will continue into H2. Our business remains
well-placed to capitalise on opportunities in 5G mobile network
infrastructure and handsets, 3D sensing in VCSEL-based products and a
host of advanced sensing applications across a broad optical spectrum."
Full Year Outlook
To date the Group has not provided full year guidance due to the
uncertainty of the global pandemic and anticipated global recession.
Despite this environment, performance to date has been strong and IQE's
customers have recently reported positive trading updates and outlooks,
underlining the resilience of the sector.
In this context, the Group now provides full year FY20 revenue guidance
of at least GBP165m equating to full year revenue growth of at least
18%.
The Group expects to deliver at least a mid-single digit adjusted
operating profit for FY20.
The Group reiterates PP&E cash capital expenditure guidance of no more
than GBP10m. Any investment in additional tools will be linked to future
revenue opportunities.
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
Nick Prowting
Christopher Golden
Citigroup Global Markets Limited (Joint Broker)
+44 (0) 20 7986 4000
Christopher Wren
Peter Catterall
Headland Consultancy (Financial PR)
+ 44 (0) 20 38054822
Andy Rivett-Carnac: +44 (0) 7968 997 365
Chloe Francklin: +44 (0)78 3497 4624
ABOUT IQE
https://www.globenewswire.com/Tracker?data=soA8hoGtdTKs3SfMWAvnl1OBuIAp8oR96Ketbg-53zzd6CkmVXqDHmEu-6acm7cIvlFGdyksFaBn8IdzeRTKtZcqI9qjOZ4HYNVsVQvD7LjzMwQDck1VaGame0iJolG4RZHZn5v1gB-2WQm4wp8dxFbJfbPMCR7PysaS60aVhQp2O8nU0UyFNFlAI3_VWuxUFYhjzwF-Tmt0WazshZu4RQer3K6dUKi_CG9o6OUE5sw=
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 this market which has high barriers to entry. IQE supplies
the whole market and is agnostic to the winners and losers at chip and
OEM level. By leveraging the 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
Consolidated Income Statement 6 months to 6 months to 12 months to
30 Jun 2020 30 Jun 2019 31 Dec 2019
(All figures GBP'000s) Note Unaudited Unaudited Audited
------------------------------------------------------ ---- ------------- ------------- --------------
Revenue 89,862 66,720 140,015
Cost of sales (70,521) (56,128) (118,631)
------------------------------------------------------ ---- ------------- ------------- --------------
Gross profit 19,341 10,592 21,384
Selling, general and administrative expenses (24,260) (13,667) (36,297)
Impairment loss on financial assets - - (4,134)
Profit on disposal of property, plant and equipment - - 245
Other gains / (losses) 4 (85) - -
Operating loss (5,004) (3,075) (18,802)
Finance costs (1,156) (394) (1,458)
Share of losses of joint ventures accounted for using
the equity method - (254) (4,688)
Adjusted profit / (loss) before income tax 3,186 (2,623) (7,019)
Adjustments 8 (9,346) (1,100) (17,929)
------------------------------------------------------ ---- ------------- ------------- --------------
Loss before income tax (6,160) (3,723) (24,948)
Taxation 1,189 (6,926) (10,180)
------------------------------------------------------ ---- ------------- ------------- --------------
Loss for the period (4,971) (10,649) (35,128)
------------------------------------------------------------ ------------- ------------- --------------
Loss attributable to:
Equity shareholders (5,269) (10,805) (35,473)
Non-controlling interests 298 156 345
------------------------------------------------------------ ------------- ------------- --------------
(4,971) (10,649) (35,128)
------------------------------------------------------------ ------------- ------------- --------------
Loss per share attributable to owners of the parent
during the period
Basic loss per share 10 (0.66p) (1.38p) (4.51p)
Diluted loss per share 10 (0.66p) (1.38p) (4.51p)
------------------------------------------------------------ ------------- ------------- --------------
Adjusted basic and diluted earnings per share are presented in Note 10.
All items included in the loss for the period relate to continuing
operations.
Consolidated statement of comprehensive income 6 months to 6 months to 12 months to
30 Jun 2020 30 Jun 2019 31 Dec 2019
(All figures GBP'000s) Unaudited Unaudited Audited
----------------------------------------------------- ------------- ------------- --------------
Loss for the period (4,971) (10,649) (35,128)
Currency translation differences on foreign currency
net investments* 8,424 (741) (3,654)
----------------------------------------------------- ------------- ------------- --------------
Total comprehensive income / (expense) for the period 3,453 (11,390) (38,782)
----------------------------------------------------- ------------- ------------- --------------
Total comprehensive income / (expense) attributable
to:
Equity shareholders 2,824 (11,507) (39,084)
Non-controlling interest 629 117 302
----------------------------------------------------- ------------- ------------- --------------
3,453 (11,390) (38,782)
----------------------------------------------------- ------------- ------------- --------------
* Balance might subsequently be reclassified to the income statement
when it becomes realised.
Restated
Consolidated Balance Sheet As At As At As At
30 Jun 30 Jun
2020 2019 31 Dec 2019
(All figures GBP'000s) Note Unaudited Unaudited Audited
---------------------------------------------------- ---- --------- ---------- -----------
Non-current assets
Intangible assets 114,605 123,328 118,456
Fixed asset investments - 75 75
Property, plant and equipment 135,159 136,628 136,482
Right of use assets 38,678 42,986 39,355
Deferred tax assets 7,955 7,095 5,679
Financial assets - 8,085 -
---------------------------------------------------- ---- --------- ---------- -----------
Total non-current assets 296,397 318,197 300,047
---------------------------------------------------- ---- --------- ---------- -----------
Current assets
Inventories 32,371 37,277 30,668
Trade and other receivables 42,546 37,313 33,065
Cash and cash equivalents 12 17,385 11,173 8,800
---------------------------------------------------- ---- --------- ---------- -----------
Total current assets 92,302 85,763 72,533
---------------------------------------------------- ---- --------- ---------- -----------
Total assets 388,699 403,960 372,580
---------------------------------------------------- ---- --------- ---------- -----------
Current liabilities
Trade and other payables (36,184) (43,039) (26,367)
Current tax liabilities (1,430) (1,242) (1,162)
Bank borrowings (5,135) - (2,034)
Lease liabilities 12 (4,167) (2,897) (3,083)
Provisions for other liabilities and charges (354) - -
Total current liabilities (47,270) (47,178) (32,646)
---------------------------------------------------- ---- --------- ---------- -----------
Non-current liabilities
Bank borrowings 12 (19,632) (12,008) (22,736)
Lease liabilities 12 (43,913) (46,375) (44,895)
Provisions for other liabilities and charges (1,486) - -
Deferred tax liabilities (2,203) - (1,860)
---------------------------------------------------- ---- --------- ---------- -----------
Total non-current liabilities (67,234) (58,383) (69,491)
---------------------------------------------------- ---- --------- ---------- -----------
Total liabilities (114,504) (105,561) (102,137)
---------------------------------------------------- ---- --------- ---------- -----------
Net assets 274,195 298,399 270,443
---------------------------------------------------- ---- --------- ---------- -----------
Equity attributable to shareholders of the parent
Share capital 14 7,968 7,913 7,961
Share premium 152,560 151,592 152,385
Retained earnings 58,557 88,494 63,826
Exchange rate reserve 35,595 30,411 27,502
Other reserves 15,036 16,324 14,919
---------------------------------------------------- ---- --------- ---------- -----------
269,716 294,734 266,593
Non-controlling Interest 4,479 3,665 3,850
---------------------------------------------------- ---- --------- ---------- -----------
Total equity 274,195 298,399 270,443
---------------------------------------------------- ---- --------- ---------- -----------
Consolidated Statement of Changes in Equity
Exchange
Unaudited Share Share Retained rate Other Non-controlling Total
(All figures GBP'000s) capital premium earnings reserve reserves interests equity
At 1 January 2020 7,961 152,385 63,826 27,502 14,919 3,850 270,443
------------------------ ------- ------- -------- -------- -------- --------------- --------
(Loss) / Profit for the
period - - (5,269) - - 298 (4,971)
Other comprehensive
expense for the year - - - 8,093 - 331 8,424
Total comprehensive
(expense) / income - - (5,269) 8,093 - 629 3,453
Share based payments - - - - 225 - 225
Tax relating to share
options - - - - 5 - 5
Proceeds from shares
issued 7 175 - - (113) - 69
------------------------ ------- ------- -------- -------- -------- --------------- --------
Total transactions with
owners 7 175 - - 117 - 299
At 30 June 2020 7,968 152,560 58,557 35,595 15,036 4,479 274,195
------------------------ ------- ------- -------- -------- -------- --------------- --------
Exchange
Unaudited Share Share Retained rate Other Non-controlling Total
(All figures GBP'000s) capital premium earnings reserve reserves interests equity
At 1 January 2019 7,767 151,147 99,299 31,113 16,404 3,548 309,278
------------------------ ------- ------- -------- -------- -------- --------------- --------
(Loss) / Profit for the
period - - (10,805) - - 156 (10,649)
Other comprehensive
expense for the year - - - (702) - (39) (741)
Total comprehensive
(expense) / income - - (10,805) (702) - 117 (11,390)
Share based payments - - - - 12 - 12
Tax relating to share
options - - - - (60) - (60)
Proceeds from shares
issued 146 445 - - (32) - 559
------------------------ ------- ------- -------- -------- -------- --------------- --------
Total transactions with
owners 146 445 - - (80) - 511
At 30 June 2019 7,913 151,592 88,494 30,411 16,324 3,665 298,399
------------------------ ------- ------- -------- -------- -------- --------------- --------
Exchange
Audited Share Share Retained rate Other Non-controlling Total
(All figures GBP'000s) capital premium earnings reserve reserves interests equity
At 1 January 2019 7,767 151,147 99,299 31,113 16,404 3,548 309,278
------------------------ ------- ------- -------- -------- -------- --------------- --------
Profit for the year - - (35,473) - - 345 (35,128)
Other comprehensive
income for the year - - - (3,611) - (43) (3,654)
Total comprehensive
income - - (35,473) (3,611) - 302 (38,782)
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
------------------------ ------- ------- -------- -------- -------- --------------- --------
Consolidated Cash Flow Statement 6 months to 6 months to 12 months to
30 Jun 2020 30 Jun 2019 31 Dec 2019
(All figures GBP'000s) Note Unaudited Unaudited Audited
---------------------------------------- ----------- ------------- ------------- --------------
Cash flows from operating activities
----------------------------------------- ---------- ------------- ------------- --------------
Adjusted cash inflow from operations 16,229 6,677 16,530
Cash impact of adjustments 8 (1,144) (2,694) (7,582)
----------------------------------------- ---------- ------------- ------------- --------------
Cash generated from operations 11 15,085 3,983 8,948
Net interest paid (247) (195) (671)
Income tax paid (629) (101) (151)
----------------------------------------- ---------- ------------- ------------- --------------
Net cash generated from operating activities 14,209 3,687 8,126
----------------------------------------------------- ------------- ------------- --------------
Cash flows from investing activities
Purchase of property, plant and equipment (1,129) (19,048) (31,864)
Purchase of intangible assets (386) (940) (1,806)
Capitalised development expenditure (2,557) (4,752) (8,427)
Proceeds from disposal of property, plant
and equipment - - 263
Acquisition of subsidiary, net of cash
acquired - - 10
----------------------------------------- ---------- ------------- ------------- --------------
Net cash used in investing activities (4,072) (24,740) (41,824)
----------------------------------------- ---------- ------------- ------------- --------------
Cash flows from financing activities
Proceeds from issuance of ordinary shares 69 559 712
Repayment of borrowings (5,000) - (17,125)
Proceeds from borrowings 5,000 12,060 41,895
Transaction costs related to loans and
borrowings - (161) -
Payment of lease liabilities (1,869) (1,035) (3,651)
----------------------------------------- ---------- ------------- ------------- --------------
Net cash (used) / generated from financing activities (1,800) 11,423 21,831
----------------------------------------------------- ------------- ------------- --------------
Net increase / (decrease) in cash and cash
equivalents 8,337 (9,630) (11,867)
Cash and cash equivalents at the beginning of the
period 8,800 20,807 20,807
Exchange gains / (losses) on cash and
cash equivalents 248 (4) (140)
----------------------------------------- ---------- ------------- ------------- --------------
Cash and cash equivalents at the end of
the period 12 17,385 11,173 8,800
----------------------------------------- ---------- ------------- ------------- --------------
1. REPORTING ENTITY
IQE plc is a public limited company incorporated in the United Kingdom
under the Companies Act 2006. The Company is domiciled in the United
Kingdom and is quoted on the Alternative Investment Market (AIM).
These condensed consolidated interim financial statements ('interim
financial statements') as at and for the six months ended 30 June 2020
comprise the Company and its Subsidiaries (together referred to as 'the
Group'). The principal activities of the Group are the development,
manufacture and sale of advanced semiconductor materials.
2. BASIS OF PREPARATION
These interim financial statements have been prepared in accordance with
IAS 34 'Interim Financial Reporting', and should be read in conjunction
with the Group's last annual consolidated financial statements as at and
for the year ended 31 December 2019 which were approved by the Board of
Directors on 28 April 2020 and have been delivered to the Registrar of
Companies. The report of the auditors on those financial statements was
unqualified, did not contain an emphasis of matter paragraph and did not
contain any statement under section 498 of the Companies Act 2006.
The interim financial statements do not include all of the information
required for a complete set of IFRS financial statements and do not
constitute statutory accounts within the meaning of section 434 of the
Companies Act 2006. However, selected explanatory notes are included to
explain events and transactions that are significant to an understanding
of the changes in the Group's financial position and performance since
the last annual financial statements.
Comparative information in the interim financial statements as at and
for the year ended 31 December 2019 has been taken from the published
audited financial statements as at and for the year ended 31 December
2019. All other periods presented are unaudited.
The 30 June 2019 balance sheet has been restated to reflect a
reclassification of a previously disclosed lease receivable of
GBP1,996,000 to a right of use asset. The reclassification has been
required to reflect the terms of a specific property sublease agreement
and has no impact on total net assets or cash.
The Company's auditor in accordance with ISRE 2410 has reviewed the
financial information contained in these interim financial statements.
This review does not constitute an audit.
The Board of Directors and the Audit Committee approved the interim
financial statements on 7 September 2020.
3. GOING CONCERN
The Group made a loss of GBP5.0m (H1 2019: GBP10.6m, FY19: GBP35.1m)
including non-cash impairments of GBP6.5m (H1 2019: GBPnil, FY19:
GBP9.6m) and generated cash and cash equivalents of GBP8.3m (H1 2019:
GBP9.6m decrease, FY19: GBP11.9m decrease) resulting in a reduction in
net debt (excluding lease liabilities) to GBP7.4m (2019: GBP0.8m, FY19
GBP16.0m) as at 30 June 2020.
The following matters have been considered by the directors in
determining the appropriateness of the going concern basis of
preparation in the financial statements:
-- The Group's operations are geographically diversified. Manufacturing
operations are located at nine 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 continues to work closely with both
suppliers and customers to manage inventory levels in order to create
resilience against potential disruption.
-- The Group delivered record revenue of GBP89.9m (H1 2019: GBP66.7m, FY19:
GBP140.0m) for the half year ended 30 June 2020 with an increase in
adjusted profit before tax to GBP3.2m (H1 2019: GBP2.6m loss, FY19:
GBP7.0m loss).
-- Net debt (excluding lease liabilities) has reduced to GBP7.4m (H1 2019:
GBP0.8m, FY19: GBP16.0m) as a result of a combination of increased cash
generated from operations, 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.
-- On 24 January 2019, the Group agreed a new GBP26,700,000 ($35,000,000)
three-year multi-currency revolving credit facility from HSBC Bank plc.
The Group has complied with all covenants associated with the facility.
-- On 29 August 2019, the Group agreed a new GBP30,000,000 five-year Asset
Finance Loan facility from HSBC Bank plc of which GBP25,000,000 is drawn
down at the date of this report. The Group has complied with all
covenants associated with the facility.
-- The Group generated cash from operating activities of GBP14.2m (H1 2019:
GBP3.7m, FY19: GBP8.1m) and its financial forecasts and projections for
the period up to and including 31 December 2021 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 severe but plausible downside financial forecasts and
projections have been prepared with significant reductions to future
forecast revenues, designed to reflect severe downside scenarios
associated with COVID-19 disruption and demand risks, for a 18-month
period to 31 December 2021. The severe but plausible downside scenario,
applied to the Group's current financial forecasts, which take account of
current trading and customer demand, assumes a 20% reduction in FY21
revenue with no margin improvement partially offset by mitigations within
the control of the company, including deferred investment in employee
related costs and certain capital expenditure mitigations. The downside
scenario illustrates that the Group is forecast to continue to comply
with its banking covenants, albeit with reduced covenant headroom, and on
this basis the directors believe that the group has adequate cash
resources to continue operating for the foreseeable future.
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 has adequate cash resources to continue operating for the
foreseeable future such that the directors consider it appropriate to
adopt the going concern basis of accounting in preparing the interim
financial statements.
4. USE OF JUDGEMENTS AND ESTIMATES
In preparing these interim financial statements, management has made
judgements and estimates that affect the application of accounting
policies and the reported amounts of assets, liabilities, income and
expense. Actual results may differ from these estimates.
The significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty were
the same as those described in the last annual financial statements
except as follows:
-- Changes in estimates associated with the recoverable value of assets
related to the Group's Filter and cREO(TM) technology; and
-- Measurement of fair values associated with outstanding derivative forward
currency contracts
The impact of Coronavirus in the six-month period ended 30 June 2020 has
not resulted in any indicators impairment or had a meaningful impact on
significant judgements or the level of estimation uncertainty associated
with the application of the Group's accounting policies. Coronavirus has
had no material adverse impact on the Group's business operations with
production continuing uninterrupted at all global sites and the Group
delivering record revenue of GBP89.9m for the six months ended 30 June
2020.
Filter and CREO(TM) Technology Assets
The Group has cREO(TM) and filter technology related intangible assets
totalling GBP11.1m that consist of patent related costs primarily
relating to the historic purchase of the cREO(TM) technology and
intellectual property portfolio from Translucent Inc. and technology
development costs associated with intellectual property developed
utilising the cREO(TM) patent portfolio.
The changing technology landscape has necessitated a review of the
cREO(TM) patent portfolio and associated technology development costs.
The review has considered technical aspects of the intellectual property
and technology development, commercial routes to market for the
technology and the level and nature of ongoing customer engagement which
has resulted in a narrowing of development activities in order to focus
investment and effort into the development of filter related
technologies using cREO(TM). The refocus of resource and investment into
filter development activities and the current lack of intent to continue
to develop other aspects of the patent portfolio and intellectual
property has resulted in a non-cash intangible asset charge of GBP6.5m
that has been charged to 'selling, general and administrative expenses'
in the consolidated income statement to write-down non-filter related
cREO(TM) patent and development costs.
An onerous contract provision of GBP1.8m has been included in
'provisions for other liabilities and charges' with the cost charged to
'selling, general and administrative expenses'. The onerous contract
provision represents the cost of minimum future royalty payments payable
to Translucent Inc. in the period prior to the expected commercial
exploitation of the Group's filter technology.
Derivative Forward Currency Contracts
At 30 June 2020 the Group had outstanding derivative forward currency
contracts with a nominal value of $16.5m (H1 2019: $nil, FY19: $nil) for
the sale of US$ in exchange for GBPGBP.
The Group's accounting policies require that derivative forward currency
contracts are measured at fair value. When measuring the fair value of
an asset or a liability, the Group uses market observable data as far as
possible. Fair values are categorised into different levels in a fair
value hierarchy based on the inputs used in the valuation techniques as
follow:
-- Level 1: Quoted prices (unadjusted) in active markets for identical
assets or liabilities
-- Level 2: Inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly (i.e as prices) or
indirectly (i.e derived from prices)
-- Level 3: Inputs for the asset or liability that are not based on
observable market data (unobservable inputs)
Derivative forward currency contracts have been categorised as Level 1
in the fair value hierarchy. The fair value of the derivative instrument
has been assessed using quoted prices in active markets for identical
assets or liabilities using independent mark to market valuations
provided by an appropriately regulated financial institution.
The fair value liability of GBP0.1m (H1 2019: GBPnil, FY19: GBPnil) has
been included in the balance sheet in 'trade and other payables" with
the fair value loss on the derivative instruments included in 'Other
gains / (losses)' in the consolidated income statement.
5. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied in these interim financial statements
are the same as those applied in the Group's consolidated financial
statements as at and for the year ended 31 December 2019. A number of
new standards are effective from 1 January 2020 but they do not have a
material effect on the Group's financial statements.
Recent accounting developments and the policy for recognising and
measuring income taxes in the interim period are described below.
5.1 Recent accounting developments
In preparing the interim financial statements, the Group has adopted the
following Standards, amendments and interpretations, which are effective
for 2020 and will be adopted in the financial statements for the year
ended 31 December 2020:
-- Amendments to IFRS 9 'Financial Instruments', IAS 39 'Financial
Instruments: Recognition and Measurement' and IFRS 7 'Financial
Instruments: Disclosures related to interest rate benchmark reform and
the impact on financial reporting
-- 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 and amendments has not had a material
impact on the interim financial statements.
5.2 Income tax expense
Income tax expense is recognised at an amount determined by multiplying
the profit / (loss) before tax for the interim reporting period by
management's best estimate of the weighted-average annual income tax
rate expected for the full financial year, adjusted for the tax effect
of certain items recognised in full in the interim period. As such, the
effective tax rate in the interim financial statements may differ from
management's estimate of the effective tax rate for the annual financial
statements.
6. PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties affecting the Group are set out in
the Strategic Report in the 2019 Annual report and financial statements
and remain unchanged at 30 June 2020.
The principal risks and uncertainties include health, safety and
environment, business interruption, market conditions, customer
concentration, financial liquidity, legal compliance, loss of
intellectual property, competition, technology change, loss of key
personnel, information technology, Brexit and the impact of the on-going
coronavirus pandemic.
Coronavirus
Three key risks to IQE were identified as possible impacts from
Coronavirus, being adverse effects to the health and safety of employees,
business disruption and reduced product demand. These risks were, and
continue to be, closely monitored by a dedicated business continuity
committee. However, to date the Group has seen no material impact on
business operations due to the pandemic. Continuous production occurred
at all of the Group's global sites throughout H1 2020 and record first
half revenues were achieved during this period. While the full effects
of the Coronavirus pandemic on global economic output in 2020 and beyond
are still uncertain, the Group forecasts continued underlying market
demand for IQE's products.
7. SEGMENTAL INFORMATION
6 Months to 30 June 2020 6 Months to 30 June 2019 12 Months to 31 Dec 2019
Unaudited Unaudited Audited
Revenue GBP'000 GBP'000 GBP'000
Wireless 45,485 30,147 68,166
Photonics 43,425 35,483 69,758
CMOS++ 952 1,090 2,091
Revenue 89,862 66,720 140,015
----------------------------------------------------- -------------------------- -------------------------- --------------------------
Adjusted operating profit / (loss)
Wireless 6,877 3,256 6,590
Photonics 6,071 1,540 1,324
CMOS++ (563) (533) (1,304)
Central corporate costs (8,043) (6,141) (11,286)
Adjusted operating profit / (loss) 4,342 (1,878) (4,676)
Adjusted items (9,346) (1,197) (14,126)
----------------------------------------------------- -------------------------- -------------------------- --------------------------
Operating loss (5,004) (3,075) (18,802)
Share of losses of joint venture accounted for using
the equity method - (254) (4,688)
Finance costs (1,156) (394) (1,458)
Loss before tax (6,160) (3,723) (24,948)
----------------------------------------------------- -------------------------- -------------------------- --------------------------
8. 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 and one-off or
non-operational items. 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.
6 months to 30 Jun 2020 6 months to 30 Jun 2019 2019
Adjusted Adjusted Reported Adjusted Adjusted Reported Adjusted Adjusted Reported
GBP'000s Results Items Results Results Items Results Results Items Results
----------- ---------- ---------- ----------------------- ---------- ---------- ----------------------- ---------- ---------- ----------
Revenue 89,862 - 89,862 66,720 - 66,720 140,015 - 140,015
Cost of
sales (70,429) (92) (70,521) (56,083) (45) (56,128) (119,145) 514 (118,631)
----------- ---------- ---------- ----------------------- ---------- ---------- ----------------------- ---------- ---------- ----------
Gross
profit 19,433 (92) 19,341 10,637 (45) 10,592 20,870 514 21,384
Other
losses (85) - (85) - - - - - -
SG&A (15,006) (9,254) (24,260) (12,515) (1,152) (13,667) (25,791) (10,506) (36,297)
Impairment
loss on
financial
assets - - - - - - - (4,134) (4,134)
Profit on
disposal
of PPE - - - - - - 245 - 245
----------- ---------- ---------- ----------------------- ---------- ---------- ----------------------- ---------- ---------- ----------
Operating
profit /
(loss) 4,342 (9,346) (5,004) (1,878) (1,197) (3,075) (4,676) (14,126) (18,802)
Share of JV
losses - - - (254) - (254) (737) (3,951) (4,688)
Finance
costs (1,156) - (1,156) (491) 97 (394) (1,606) 148 (1,458)
----------- ---------- ---------- ----------------------- ---------- ---------- ----------------------- ---------- ---------- ----------
Profit /
(loss)
before
tax 3,186 (9,346) (6,160) (2,623) (1,100) (3,723) (7,019) (17,929) (24,948)
Taxation (637) 1,826 1,189 (7,291) 365 (6,926) (11,991) 1,811 (10,180)
---------- ---------- ----------------------- ---------- ---------- ----------------------- ---------- ---------- ----------
Profit /
(loss) for
the
period 2,549 (7,520) (4,971) (9,914) (735) (10,649) (19,010) (16,118) (35,128)
----------- ---------- ---------- ----------------------- ---------- ---------- ----------------------- ---------- ---------- ----------
6 months to 30 Jun 2020 6 months to 30 Jun 2019 2019
Pre-tax Tax Reported Pre-tax Tax Reported Pre-tax Tax Reported
GBP'000s Adjustment Impact Results Adjustment Impact Results Adjustment Impact Results
-------------- ---------- ------ ----------------------- ---------- ------ ----------------------- ---------- ------ ----------
Share based
payments (275) 44 (231) (135) 182 47 771 133 904
Amortisation
of acquired
intangibles - - - (266) 56 (210) (385) 81 (304)
Restructuring - - - (223) 47 (176) (813) 164 (649)
Patent dispute
legal fees (694) 132 (562) (573) 109 (464) (4,308) 775 (3,533)
Impairment --
intangibles (6,537) 1,300 (5,237) - - - (3,805) 685 (3,120)
Onerous
contract (1,840) 350 (1,490) - - - - - -
Impairment --
ROU asset - - - - - - (1,623) - (1,623)
Impairment --
financial
assets - - - - - - (4,134) - (4,134)
Share of JV
losses --
financial
asset - - - - - - (3,951) - (3,951)
CSDC
acquisition -
negative
goodwill - - - - - - 171 - 171
Discounting - - - 97 (29) 68 148 (27) 121
Total (9,346) 1,826 (7,520) (1,100) 365 (735) (17,929) 1,811 (16,118)
-------------- ---------- ------ ----------------------- ---------- ------ ----------------------- ---------- ------ ----------
The nature of the adjusted items is as follows:
--Share based payments -- The charge recorded in accordance with IFRS 2
'share based payment' of which GBP0.1m (H1 2019: GBP0.1m, FY19 income
GBP0.5m) has been classified within cost of sales in gross profit and
GBP0.2m (H1 2019: GBP0.05m, FY19 income GBP0.3m) in selling, general and
administrative expenses within operating loss.
--Amortisation of acquired intangibles arising in respect of fair value
exercises associated with previous corporate acquisitions -- The charge
of GBPnil (H1 2019: GBP0.3m, FY19 GBP0.4m) has been classified as
selling, general and administrative expenses within operating loss and
is non-cash.
--Restructuring -- The charge of GBPnil (H1 2019: GBP0.2m, FY19 GBP0.8m)
relates to:
i. Site-specific restructuring and associated employee severance
costs of GBPnil (H1 2019: GBPnil, FY19 GBP0.6m). The charge has been
classified as selling, general and administrative expenses within
operating loss and represents a cash cost.
ii. The closure of the Group's manufacturing facility in New
Jersey, USA and the transfer of the associated trade and assets to the
Group's manufacturing facility in Massachusetts, USA at a cost of GBPnil
(H1 2019: GBP0.2m, FY19 GBP0.2m). Cash costs defrayed in the year of
GBPnil (H1 2019: GBP1.3m, FY19 GBP1.4m) comprised severance and reactor
decommissioning costs. The charge has been classified as selling,
general and administrative expenses within operating loss.
--Patent dispute legal costs -- The charge relates to legal fees
incurred in respect of a patent dispute defence. Costs of GBP0.7m (H1
2019: GBP0.6m, FY19: GBP4.3m) have been classified within selling,
general and administrative expenses within operating loss. Cash costs
defrayed in the period total GBP1.1m (H1 2019: GBP0.7m, FY19: GBP4.3m).
--Impairment of intangibles -- The non-cash charge of GBP6.5m (H1 2019:
GBPnil, FY19 GBP3.8m) 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 FY19 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 GBP1.8m is
non-cash in the current period and represents the cost of minimum
guaranteed future royalty payments associated with the cREO(TM)
technology acquired from Translucent Inc. that are payable in the period
prior to the expected commercial exploitation of the Group's cREO(TM)
filter technology.
--Impairment of right of use asset -- The non-cash charge of GBPnil (H1
2019: GBPnil, FY19 GBP1.6m) 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 profit
/ (loss).
--Impairment of financial asset -- The non-cash charge of GBPnil (H1
2019: GBPnil, FY19 GBP4.1m) related to the expected credit loss
associated with the Group's preference share financial asset due from
its joint venture, Compound Semiconductor Centre Limited.
--Share of joint venture losses (financial asset) - The factors that led
in 2019 to the recognition an impairment loss relating to the preference
share financial asset due from the joint venture, Compound Semiconductor
Centre Limited, resulted in a considerable lengthening of the period
over which the asset is expected to be recovered. As a result, the group
reassessed the preference share as a long-term interest in the joint
venture on the basis that repayment was no longer expected in the
foreseeable future. As a long-term interest in an equity accounted
investee, the group applied the loss absorption requirement in IAS 28.38
to the carrying amount of the preference share financial asset, after
the application of an expected credit loss as described above, and
allocated a further share of the joint venture's losses to the
preference share financial asset. This resulted in a further write down
of the asset, to GBPnil, representing a charge of GBP3,951,000, over and
above the expected credit loss charge of GBP4,134,000, being recognised
in profit or loss in 2019.
--CSDC acquisition negative goodwill -- The non-cash credit of GBPnil
(H1 2019: GBPnil, FY19 GBP0.2m) related to the negative goodwill arising
on the Group's acquisition of its former joint venture, Compound
Semiconductor Centre Limited. The credit was classified as selling,
general and administrative expenses within operating profit / (loss).
--Discounting -- This relates to the unwinding of the discounting on
long term financial assets of GBPnil (H1 2019: GBP0.1m, FY19: GBP0.1m)
and has been classified as finance costs within profit before tax.
Adjusted EBITDA (adjusted earnings before interest, tax, depreciation
and amortisation) has been calculated as follows:
6 months to 6 months to 12 months to
30 June 2020 30 June 2019 31 Dec 2019
(All figures GBP'000s) Unaudited Unaudited Audited
---------------------------------- ------------- ------------- ------------
Loss attributable to equity
shareholders (5,269) (10,805) (35,473)
Non-controlling interest 298 156 345
Finance costs 1,156 394 1,458
Tax (1,189) 6,926 10,180
Depreciation of property, plant
and equipment 6,230 4,761 10,477
Depreciation of right of use
assets 1,850 1,025 3,590
Amortisation of intangible fixed
assets 3,904 3,981 8,222
(Profit) / loss on disposal of PPE - - (245)
Share based payments 275 135 (771)
Adjusted Items 9,071 796 18,463
---------------------------------- ------------- ------------- ------------
Restructuring - 223 813
Patent dispute legal costs 694 573 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 - - 4,134
Share of joint venture losses
(financial asset) - - 3,951
CSDC acquisition negative goodwill - - (171)
---------------------------------- ------------- ------------- ------------
Adjusted EBITDA 16,326 7,369 16,246
---------------------------------- ------------- ------------- ------------
9. TAXATION
The Group's consolidated effective tax rate for the six months ended 30
June 2020 was 19.3% (H1 2019: -186.0%, 2019: -40.8%). The effective tax
rate differs from the theoretical amount that would arise from applying
the standard corporation tax in the UK of 19.0% (H1 2019: 19.0%, FY19:
19.0%) principally due to the following factors:
-- The Group's results report certain financial measures after a number of
adjusted items with a tax impact of GBP1.8m as detailed in note 8.
-- Differences in overseas tax rates, principally the United States of
America and Taiwan
10. EARNINGS / (LOSS) PER SHARE
6 months to 6 months to 12 months to
30 June 2020 30 June 2019 31 Dec 2019
(All figures GBP'000s) Unaudited Unaudited Audited
Loss attributable to ordinary shareholders (5,269) (10,805) (35,473)
Adjustments to loss after tax (note 8) 7,520 735 16,118
Adjusted profit / (loss) attributable to ordinary
shareholders 2,251 (10,070) (19,355)
-------------------------------------------------- ------------- ------------- ------------
Number of shares:
Weighted average number of ordinary shares 796,338,502 780,640,261 787,175,574
Dilutive share options 8,963,049 24,149,201 13,562,165
-------------------------------------------------- ------------- ------------- ------------
805,301,551 804,789,462 800,737,739
-------------------------------------------------- ------------- ------------- ------------
Adjusted basic earnings / (loss) per share 0.28p (1.29p) (2.46p)
Basic loss per share (0.66p) (1.38p) (4.51p)
Adjusted diluted earnings / (loss) per share 0.28p (1.29p) (2.46p)
Diluted loss per share (0.66p) (1.38p) (4.51p)
Basic loss per share is calculated by dividing the loss attributable to
ordinary shareholders by the weighted average number of ordinary shares
during the period.
Diluted loss per share is calculated by dividing the loss attributable
to ordinary shareholders by the weighted average number of shares and
'in the money' share options in issue. Share options are classified as
'in the money' if their exercise price is lower than the average share
price for the period. As required by IAS 33, this calculation assumes
that the proceeds receivable from the exercise of 'in the money' options
would be used to purchase shares in the open market in order to reduce
the number of new shares that would need to be issued.
11. CASH GENERATED FROM OPERATIONS
6 months to 6 months to 12 months to
30 June 2020 30 June 2019 31 Dec 2019
(All figures GBP'000s) Unaudited Unaudited Audited
------------------------------------------------------ ------------- ------------- ------------
Loss before tax (6,160) (3,723) (24,948)
Finance costs 1,156 394 1,458
Depreciation of property, plant and equipment 6,230 4,761 10,477
Depreciation of right of use assets 1,850 1,025 3,590
Amortisation of intangible assets 3,904 3,981 8,222
Impairment of intangible assets 6,537 - 3,805
Impairment of right of use assets - - 1,623
Impairment of financial assets - - 4,134
Onerous contract 1,840 - -
Share of joint venture - - 3,951
Inventory write downs 2,167 1,031 3,219
Profit on disposal of property, plant and equipment - - (245)
CSDC acquisition negative goodwill - - (171)
Share based payments 275 135 (771)
------------------------------------------------------ ------------- ------------- ------------
Cash inflow from operations before changes in working
capital 17,799 7,604 14,344
(Increase) / decrease in inventories (2,920) (2,636) 2,184
(Increase) / decrease in trade and other receivables (6,064) 439 4,130
Increase / (Decrease) in trade and other payables 6,270 (1,424) (11,710)
------------------------------------------------------ ------------- ------------- ------------
Cash inflow from operations 15,085 3,983 8,948
------------------------------------------------------ ------------- ------------- ------------
12. ANALYSIS OF NET DEBT
6 months to 6 months to 12 months to
30 June 2020 30 June 2019 31 Dec 2019
(All figures GBP'000s) Unaudited Unaudited Audited
------------------------------ ------------- ------------- ------------
Bank borrowings due after one
year (19,632) (12,008) (22,736)
Bank borrowings due within one
year (5,135) - (2,034)
Lease liabilities due after
one year (43,913) (46,375) (44,895)
Lease liabilities due within
one year (4,167) (2,897) (3,083)
------------------------------ ------------- ------------- ------------
Total borrowings (72,847) (61,280) (72,748)
Cash and cash equivalents 17,385 11,173 8,800
------------------------------ ------------- ------------- ------------
Net debt (55,462) (50,107) (63,948)
------------------------------ ------------- ------------- ------------
On 24 January 2019, the Company agreed a new GBP27,300,000 ($35,000,000)
multi-currency revolving credit facility, provided by HSBC Bank plc that
is secured over the assets of IQE plc and certain subsidiary companies.
The facility has a three-year term and an interest rate margin of
between 1.45 and 1.95 per cent per annum over LIBOR on any drawn
balances.
On 29 August 2019, the Company agreed a new GBP30,000,000 asset finance
facility, provided by HSBC Bank plc that is secured over various plant
and machinery assets. The facility has a five-year term and an interest
rate margin of 1.65% per annum over base rate on any drawn balances.
Bank borrowings relate to amounts drawn down on the Group's asset
finance facility.
Cash and cash equivalents comprise balances held in instant access bank
accounts and other short-term deposits
with a maturity of less than 3 months.
13. SHARE BASED PAYMENT ARRANGEMENTS
Long term incentive awards
On 26 May 2000, as amended by shareholders at the Annual General Meeting
on 17 May 2002, The Group established a share option plan that entitles
the Group's Remuneration Committee to grant long term incentive awards
over shares in the company to directors and employees of the Group.
On 20 February 2020, long term incentive awards that become exercisable
between three and ten years from 31 March 2020, subject to continued
employment and achievement of performance conditions relating to
earnings per share and total shareholder return targets over a
three-year vesting period were awarded to directors and employees of the
Group. Under the terms of these awards, holders of vested options are
entitled to purchase shares at the nominal value of the shares at the
date of grant.
All options are to be settled by physical delivery of shares. The terms
and conditions of the share options granted during the six months ended
30 June 2020 are as follows:
Grant date/employees entitled Number of instruments Contractual life of options Vesting conditions
-------------------------------------------------- ----------------------- ----------------------------- -----------------------------------------------------
Option grant to executive directors on 20 February 2,727,216 10 years 3 years-service from grant date, diluted adjusted
2020 earnings per share targets between 0.25p -- 0.40p
and total shareholder return targets of between 100%
- 130% versus the FTSE All Share Index
Option grant to employees on 20 February 2020 5,568,772 10 years 3 years-service from grant date, diluted adjusted
earnings per share targets between 0.25p -- 0.40p
and total shareholder return targets of between 100%
- 130% versus the FTSE All Share Index
-------------------------------------------------- ----------------------- ----------------------------- -----------------------------------------------------
Measurement of grant date fair values
The fair value of the long-term incentive awards, calculated as GBP1.4m
at the grant date has been determined using the Monte Carlo and Black
Scholes models. The following inputs were used in the measurement of the
fair values at grant date.
Principal assumptions 2020 2019
-------------------------------------------- ----- -----
Weighted average share price at grant date 37.85 29.07
Weighted average exercise price 12.35 11.02
Weighted average vesting period (years) 3 3
Option life (years) 10 10
Weighted average expected life (years) 3 3
Weighted average expected volatility factor 64% 56%
Weighted average risk-free rate 0.6% 0.9%
Dividend yield 0% 0%
-------------------------------------------- ----- -----
The expected volatility factor is based on historical share price
volatility over the three years immediately preceding the grant of the
option. The expected life is the average expected period to exercise.
The risk-free rate of return is the yield of zero-coupon UK government
bonds of a term consistent with the assumed option life.
Non-market performance conditions are incorporated into the calculation
of fair value by estimating the proportion of share options that will
vest and be exercised based on a combination of historical trends and
future expected trading performance. These are reassessed at the end of
each period for each tranche of unvested options
14. SHARE CAPITAL
6 months to 6 months to 12 months to
30 June 2020 30 June 2019 31 Dec 2019
Number of shares Unaudited Unaudited Audited
---------------------------- ------------- ------------- ------------
As at 1 January 796,142,302 776,699,681 776,699,681
Employee share schemes 673,585 14,596,208 19,442,621
As at 30 June / 31 December 796,815,887 791,295,889 796,142,302
---------------------------- ------------- ------------- ------------
6 months to 6 months to 12 months to
30 June 2020 30 June 2019 31 Dec 2019
(All figures GBP'000s) Unaudited Unaudited Audited
---------------------------- ------------- ------------- ------------
As at 1 January 7,961 7,767 7,767
Employee share schemes 7 146 194
As at 30 June / 31 December 7,968 7,913 7,961
---------------------------- ------------- ------------- ------------
15. RELATED PARTY TRANSACTIONS
Transactions with Joint Ventures
Compound Semiconductor Centre Limited ('CSC')
The Group established CSC with its joint venture partner as a centre of
excellence for the development and commercialisation of advanced
compound semiconductor wafer products in Europe and on its formation,
the Group contributed assets to the joint venture valued at
GBP12,000,000 as part of its initial investment.
The activities of CSC include research and development into advanced
compound semiconductor wafer products, the provision of contract
manufacturing services for compound semiconductor wafers to certain
subsidiaries within the IQE plc Group and the provision of compound
semiconductor manufacturing services to other third parties.
CSC operates from its manufacturing facilities in Cardiff, United
Kingdom and leases certain additional administrative building space from
the Group. During the period the CSC leased this space from the Group
for GBP57,500 (H1 2019 GBP57,500, 2019: GBP115,000) and procured certain
administrative support services from the Group for GBP117,500 (H1 2019:
GBP117,500, 2019: GBP235,000). As part of the administrative support
services provided to CSC the Group procured goods and services,
recharged to CSC at cost, totalling GBP1,971,028 (H1 2019: GBP2,235,135,
2019: GBP3,468,000).
CSC granted the Group the right to use its assets following its
formation for a minimum five-year period. Costs associated with the
right to use the CSC's assets are treated by the Group as operating
lease costs. Costs are charged by the CSC at a price which reflects the
CSC's cash cost of production (including direct labour, materials and
site costs) but excludes any related depreciation or amortisation of the
CSC's property, plant and equipment and intangible assets respectively
under the terms of the joint venture agreement between the parties.
Costs associated with the right to use the CSC's assets totalled
GBP3,223,900 (H1 2019: GBP3,464,000, 2019: GBP6,656,000) in the period.
At 30 June 2020 an amount of GBP559,800 (H1 2019: GBP233,700, 2019:
GBP222,000) was owed from the CSC.
In the Groups balance sheet 'A' Preference Shares with a nominal value
of GBP8,800,000 (H1 2019: GBP8,800,000, 2019: GBP8,800,000) are included
in financial assets at an amortised cost of GBP3,951,000 (H1 2019:
GBP8,085,000, 2019: GBP3,951,000) and the Group has a shareholder loan
of GBP240,500 (H1 2019: GBP238,500, 2019: GBP239,000) due from CSC.
16. RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU;
-- the interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being
an indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed set
of financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months
of the current financial year and that have materially affected the
financial position or performance of the entity during that period; and
any changes in the related party transactions described in the last
annual report that could do so.
Dr Drew Nelson OBE Tim Pullen
President and Chief Executive Officer, IQE Plc. Chief Financial Officer, IQE Plc.
7 September 2020 7 September 2020
(END) Dow Jones Newswires
September 08, 2020 02:00 ET (06:00 GMT)
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