September 7, 2011 3:49 pm

IQE pre-tax profit up 28% on smartphone demand

The wave of demand for smartphones and tablet devices has buoyed revenues and profits at IQE, the Cardiff-based maker of wafers for semiconductors.

IQE half-year results for the six months to 30 June 2011
Sales Pre-tax profit Earnings per share Dividend
£38.3m £2.8m 44p
↑ 16% ↑ 28% ↑ 25%

The Aim-traded group on Wednesday said that interim revenues at its wireless division, which supplies wafers used in devices including smartphones, wireless infrastructure, WiFi and GPS units, rose by more than a fifth.

However the 16 per cent increase in total revenues from £33m to £38.3m ($61.2m), and 28 per cent jump in pre-tax profit from £2.2m to £2.8m was accompanied by a note of caution about the group’s prospects.

“Our overall upbeat outlook is tempered by recent growing uncertainty in the global economy,” said Drew Nelson, IQE founder and chief executive. “This has the potential to impact inventory levels downstream in the supply chain or of individual customers.”

The sentiment prompted investors to sell off the shares, which shed 11 per cent, or 3½p, to 28½p.

“For the first time in the cycle we have seen management show signs of caution with regard to the growing uncertainty in the economy (although management has not seen any impact in inventory levels or supply chain as yet),” noted analysts at Killik & Co.

“Whilst we remain buyers of the shares in the long term ... we feel that the cautious outlook statement from management is likely to act as a drag on the shares in the short term.”

IQE’s technology is also found in lasers used in the healthcare industry for skin treatments, and like-for-like sales at the group’s optoelectronic division rose 16 per cent in the half.

“The group’s performance shows that it has sustained its strong momentum from previous years,” said Mr Nelson.

“We grew our wireless revenues 21 per cent year-on-year versus industry growth of 10 per cent. So we clearly took some market share.”

IQE, which came to market in 1999, uses an advanced crystal growth technology called epitaxy to make wafers which are used in chips for mobile phones, solar panels and optical products.

In late 2010 IQE paid $14m for US semiconductor group Galaxy Compounds, which it funded with a £20m fundraising that was also used to expand the group.

“For us, quite a significant event for us is that our balance sheet is now ungeared,” said Mr Nelson. ”Last year we had debt of about £7m and that’s now translated into net cash of £1m.”

In the six months to June 30 diluted earnings per share rose from 44p to 55p. No dividend was proposed.

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