REG - IQE PLC - IQE plc: FY 2022 Unaudited Preliminary Results
17/05/2023 16:45
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230517:nRSQ7771Za&default-theme=true
RNS Number : 7771Z IQE PLC 17 May 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
IQE plc
("IQE" or the "Group")
Unaudited Preliminary Results for the Full Year ended 31 December 2022
Cardiff, UK
17 May 2023
Resilient performance and strategic progress against a challenging industry
backdrop
IQE plc (AIM: IQE, "IQE" or the "Group"), a leading supplier of compound
semiconductor wafer products and advanced material solutions to the global
semiconductor industry, today provides unaudited preliminary results in
relation to the full year ended 31 December 2022.
FY 2022 Financial highlights
FY 2022 FY 2021 Change Constant currency change (%)
£'m*
£'m*
(%)
Revenue 167.5 154.1 9% (2%)
Adjusted EBITDA 23.4 18.7 25%
Adjusted EBIT (3.6) (6.5)
Reported EBIT(1) (73.0) (20.0)
Reported loss before tax(2) (75.4) (22.2)
Adjusted net cashflow from operations 15.7 17.9 (12%)
Reported net cashflow from operations 8.9 18.9 (53%)
Capital expenditure(3) (9.4) (15.1) (37)%
Adjusted net debt(4) (15.2) (5.8)
Reported net debt (66.5) (60.2)
Cash and cash equivalents 11.6 10.8
Diluted EPS (9.27p) (3.87p)
Adjusted Diluted EPS (0.74p) (2.41p)
Note: FY22 financials are unaudited
1. Reported figures include a £62.7m non-cash goodwill impairment
2. Adjustments include impairment of intangible assets, restructuring costs,
CEO recruitment costs and share-based payment charges.
3. Capex stated is Property, Plant and Equipment cash capex.
4. Adjusted net debt is calculated as cash less borrowings but excluding lease
liabilities and fair value gains/losses on derivative instruments.
Group revenue for FY 2022 was up 9% to £167.5m (FY 2021: £154.1m). On a
constant currency basis, Group revenue was £151.2m (FY 2021: £154.1m).
Wireless revenue of £76.0m (FY 2021: £83.2m) was down 9% year-on-year on a
reported basis and down 18% on a constant currency basis. This decrease
reflects a decline in wireless GaAs epiwafer sales and the impact of the
closure of the Group's manufacturing facility in Singapore focused on the
manufacture and sale of legacy pHEMT epiwafers. The reduction in wireless GaAs
epiwafer sales in particular has been impacted by softness in the broader
smartphone handset market which has led to increased inventory levels
throughout the manufacturing supply chain. This has continued to adversely
affect demand for wireless GaAs epiwafers in H1 2023.
Photonics revenue of £88.7m (FY 2021: £68.1m) was up 30% year-on-year on a
reported basis and up 18% on a constant currency basis. This increase reflects
the continued strength of demand for VCSELs used in 3D sensing. The Group has
benefitted from increased customer diversification following the announcement
of a new multi-year strategic agreement with a global consumer electronics
leader in early Q4 2022, and higher other Photonics product sales driven by a
combination of factors including the re-phasing of certain aerospace and
security orders.
CMOS++ revenue of £2.8m (FY 2021: £2.8m) was flat year-on-year and down 9%
on a constant currency basis.
Group adjusted EBITDA of £23.4m (FY 2021: £18.7m). Adjusted EBITDA margin of
14% (FY 2021: 12%) as costs were controlled in line with the Group's
efficiency objectives.
Reported operating loss of £73.0m (FY 2021: (£20.0m)) primarily due to the
non-cash impairment of goodwill of £62.7m (see below), with an adjusted
operating loss of £3.6m (FY 2021: £6.5m).
Reported net cashflow from operations of £8.9m (FY 2021: £18.9m) reflecting
cash generated through the Group's resilient trading performance offset by
adverse working capital movements and the cash impact of adjusted
non-operational items.
Adjusted net debt position (excluding lease liabilities) of £15.2m as at 31
December 2022 (FY 2021: net debt of £5.8m).
Capital expenditure of £9.4m on PP&E (FY 2021: £15.1m) to support future
growth opportunities. The Group continues to invest in research and
development with capitalised technology development of £3.8m (FY 2021:
£3.0m).
Impairment of goodwill of £62.7m (FY 2021: £nil) is a non-cash impairment
principally relating to the Group's wireless operating segment where
reductions in sales volumes, predominantly linked to lower levels of
smartphone-related demand and continuing softness in 5G infrastructure, is
forecast to result in lower levels of capacity use and profitability in this
segment. The impairment results from the near-term softness in forecasts for
wireless products as a result of the industry-wide semiconductor downturn
driven by inventory build-up throughout the supply chain.
Operational highlights
· Positive progress on the implementation of the Group's growth
strategy set out at its November 2022 Capital Markets Day
· Technological innovations supporting IQE's diversification into
high-growth markets including power electronic and microLED display products
o Development of world's first commercially available 200 mm (8") VCSEL
wafer opens significant opportunities with new foundry partnerships
o Advanced display technology expanded with continued development of
microLED based on GaN (Blue & Green) & GaAs (Red)
o Ongoing capex focused on investment in Gallium Nitride ("GaN")
manufacturing capacity to further strengthen power electronic and advanced
display capabilities
· Continued strengthening of operational processes laying foundations
for future growth
o Launch of new manufacturing management software in South Wales ahead of
global roll-out will deliver consistent and scalable improvements to
operational performance
o Building commercial engine, including global sales and customer excellence
functions
· Positive commercial progress made in line with our growth strategy
o Long-term and strategic agreements signed with several customers, across
existing and new product segments
o Active pipeline of deals for development and mass production of epiwafers
for power electronics
· Global site optimisation programme continued in line with strategy
o Singapore site closed in June 2022 and Pennsylvania site on track to be
closed by 2024
· Established the IQE Innovation Centre at the Cardiff, South Wales
site
Current Trading and Outlook
· Current trading is affected by the temporary semiconductor industry
downturn, with reduced customer forecasts, orders and associated revenue
· H1 2023 revenue expected to be in the range of £50-56m
· Net debt as at 31 March 2023 was c.£24.0m (net debt is defined as
cash less borrowings but excluding lease liabilities and fair value
gains/losses on derivative instruments)
· FY23 revenue in line with management expectations set out in March
2023 which include a return to year-on-year growth during the second half of
2023
· Diversification into high-growth markets of power and display,
targeting GaN growth opportunities in FY 2024 and beyond
· The Company expects PP&E capex related to essential maintenance
and health & safety items and existing commitments to be approximately
£7.4m in FY 2023. In addition, the diversification strategy will lead to
investment in GaN manufacturing capacity of approximately £8.3m.
Proposed fundraise and banking facilities
The Company has announced today a placing to raise up to £30 million ("the
Placing") and a Rex retail offer of up to £3 million (together with the
Placing, the "Fundraising") in order to ensure that the Company can continue
to invest to execute on its strategy, meet its near-term liquidity
requirements and deliver a sustainable balance sheet position going forward.
IQE is prioritising investment in GaN capacity as part of its long-term growth
strategy, underpinning the diversification into the power electronics and
microLED display segments.
The Group has entered into an agreement with its lending bank, HSBC, to extend
the term of its $35m RCF to May 2026, conditional on the completion of the
Placing. The facility was due to expire in April 2024. The Company has also
agreed revised leverage and interest cover covenants, with quarterly testing
from 31 December 2023.
If the Placing were not to proceed, the Company would receive less
preferential terms from HSBC with the likelihood that further Bank support or
alternative sources of capital will be required to increase liquidity in the
course of 2023 in order to ensure both sufficient headroom and covenant
compliance.
The full terms and conditions of the placing are set out in the Fundraising
announcement and can be found on our website at
https://www.iqep.com/investors/capital-raise-2023/
(https://www.iqep.com/investors/capital-raise-2023/) .
Americo Lemos, CEO of IQE, commented:
"IQE delivered a solid full year performance and improved margins in 2022
despite a challenging industry backdrop. Our strategic and long-term customer
engagement model was validated by the announcement of several key partnership
agreements during the year, and has resulted in a healthy new business
pipeline. We remain confident in the strategy we announced at our Capital
Markets Day and are focused on diversifying into high-growth markets such as
power electronics and microLED displays. The Fundraising we have announced
today will enable us to continue to invest in GaN technologies for these
applications, while providing us with the fiscal headroom to navigate the
current cyclical downturn."
Results Presentation
IQE will present its FY 2022 Results via webcast and conference call at 9:00am
BST on Wednesday 17 May 2023. If you would like to view this webcast, please
register by using the below link and follow the instructions:
https://brrmedia.news/IQE_FY22 (https://brrmedia.news/IQE_FY22)
This Announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No. 596/2014, as it forms part of UK domestic
law by virtue of the European Union (Withdrawal) Act 2018 (as amended). This
announcement is issued on behalf of IQE by Tim Pullen, CFO.
Contacts:
IQE plc
+44 (0) 29 2083 9400
Americo Lemos
Tim Pullen
Amy Barlow
Peel Hunt (Nomad and Joint Broker)
+44 (0) 20 7418 8900
Paul Gillam
Richard Chambers
James Smith
Numis (Joint Broker)
+44 (0) 20 7260 1000
Simon Willis
Hugo Rubinstein
Iqra Amin
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.iqep.com/ (https://www.iqep.com/)
IQE is the leading global supplier of advanced compound semiconductor wafers
and materials solutions that enable a diverse range of applications across:
· Smart Connected Devices
· Communications Infrastructure
· Automotive and Industrial
· Aerospace and Security
As a scaled global epitaxy wafer manufacturer, IQE is uniquely positioned in
this market which has high barriers to entry. IQE supplies the global market
and is enabling customers to innovate 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 employees across eight manufacturing
locations in the UK, US and Taiwan, and is listed on the AIM Stock Exchange in
London.
Financial Review
The Group reports financial performance in accordance with International
accounting standards in conformity with UK adopted international accounting
standards ('UK adopted 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 UK adopted
IFRS GAAP performance measures, are set out in note 4.
Current outlook
The Group's trading in 2022 was impacted by the broader semiconductor industry
downturn, in particular increasing softness in smartphone-related demand and
weakness in 5G infrastructure demand in the latter part of the year. Group
revenue of £167.5m (2021: £154.1m) has increased 9% benefiting from a
foreign exchange tailwind of 10.6%. The Group has reported an operating loss
of £73.0m (2021: £20.0m) which includes a non-cash impairment charge of
£62.7m related to the write-down of goodwill resulting from a change in
forecasts related to the current semiconductor downturn and the associated
market softness impacting the Group.
Current trading is affected by the temporary semiconductor industry downturn,
with reduced customer forecasts, orders and associated revenue. First half
revenue is expected to be in the range of £50m-£56m. Net debt as at 31 March
2023 was c.£24m (net debt is defined as cash less borrowings but excluding
lease liabilities and fair value gains/losses on derivative instruments). Full
year revenue for FY23 is expected to include a return to year-on-year growth
during the second half. The Group is targeting diversification into the
high-growth markets of power and advanced display by investing in the
expansion of its GaN capacity. The Company expects PP&E capex related to
essential maintenance and health & safety items and existing commitments
to be approximately £7.4m in FY23. In addition, the diversification strategy
will lead to investment in GaN of approximately £8.3m.
Steps have been taken by the Directors to strengthen the balance sheet of the
business in the short-term, including the renewal of the Group's £28.7m
($35.0m) multi-currency revolving credit facility provided by HSBC Bank plc
and the announced £30m equity fundraise. These steps, combined with a number
of post-year end cost rationalisation and cash preservation actions that have
been implemented by the Directors will provide the necessary liquidity for the
Group to navigate the current semiconductor market downturn, provide
sufficient headroom to protect against the recovery occurring later than
forecast, and allow the Group to continue investing in its growth and
diversification strategy.
Review of the year
Group revenue of £167.5m (2021: £154.1m) has increased 9%, benefiting from a
foreign exchange tailwind of 10.6% on a reported basis where increases in
Photonics revenues have offset declines in Wireless revenues.
The Group's Photonics business segment represents the largest proportion of
the Group's revenue, accounting for 52.9% (2021: 44.2%) of total wafer sales
with Wireless representing 45.4% (2021: 54.0%) and CMOSS++ representing 1.7%
(2021: 1.8%).
Photonics wafer revenues increased 30% to £88.7m (2021: £68.1m). The
increase in Photonics wafer revenues reflects the continued strength in demand
for VCSELs used in 3D sensing, including the impact of increased customer
diversification following the Group's announcement of a new multi-year
strategic agreement with a global consumer electronics leader in early Q4
2022, and as a result of higher other photonic product sales linked to a
combination of factors including the re-phasing of certain defence and
security orders associated with large programmes and strong demand for the
Group's substrate related products.
Wireless wafer revenues decreased 9% to £76.0m (2021: £83.2m). The decrease
in wireless wafer revenues reflects a decline in wireless GaAs epiwafer sales,
continued softness in 5G infrastructure, and the impact of the closure of the
Group's manufacturing facility in Singapore that focused on the manufacture
and sale of legacy pHEMT epiwafers. The reduction in wireless GaAs epiwafer
sales in particular has been impacted by softness in the broader smartphone
handset market which has led to increased inventory levels throughout the
manufacturing supply chain. This has continued to adversely affect demand for
wireless GaAs epiwafers in H1 2023.
Statutory gross profit increased from £17.6m to £26.4m. The increase in
gross profit reflects a combination of a favourable shift in sales mix with a
higher proportion of the group's revenue derived from higher margin photonics
products and the impact of a favourable foreign exchange tailwind which has
helped to increase gross profit margin percentage to 15.8% (2021: 11.5%).
Adjusted gross profit, which excludes the charge for share based payments,
increased from £18.7m to £26.5m with an increase in gross margin from 12.2%
to 15.8%.
Selling, general and administrative ('SG&A') expenses have increased 2.9%
in the year from £30.3m to £31.2m, excluding the separately disclosed
impairment loss on intangible assets of £66.2m (2021: £7.4m) and the
impairment loss of £2.3m (2021: £0.03m credit) related to a small number of
customer specific receivables. Adjusted SG&A expenses, which exclude
adjustments for share based payments, restructuring costs, Chief Executive
Officer recruitment costs and asset impairments have increased from £25.3m to
£26.8m (5.7%), reflecting a combination of inflationary pressure, certain
employee-related investment and increases in certain legal and professional
costs.
As part of the Group's global footprint optimisation plan restructuring costs
totalling £4.2m (2021: £3.7m) have been incurred relating to costs
associated with the announced closure of the Group's manufacturing facility in
Pennsylvania, USA and the closure of the Group's manufacturing facility in
Singapore. Within the restructuring costs are £3.0m (2021: £3.0m) relating
to a combination of site decommissioning, asset write-downs and employee
related costs in Singapore and £1.2m (2021: £0.7m) relating to employee
related and asset decommissioning costs associated with the closure of the
Pennsylvania, USA site.
Chief Executive Officer recruitment costs of £0.2m (2021: £0.7m) include
share award and cash costs associated with the new Chief Executive Officer's
starting bonus and the partial release of accrued prior period external Chief
Executive Officer recruitment fees that were linked to first year annual bonus
awards. Chief Executive Officer recruitment costs in 2021 included settlement
costs and legal fees of £0.3m associated with the transition of the former
Chief Executive Officer to a non-executive role and external recruitment fees
of £0.4m.
Impairment of goodwill of £62.7m (2021: £nil) principally relates to the
Group's wireless operating segment where reductions in sales volumes,
primarily linked to lower levels of smartphone-related demand and continuing
weakness in 5G infrastructure is forecast to result in lower levels of
capacity utilisation and operating segment profitability. The non-cash
impairment results from the near-term softness in forecasts for wireless
products as a result of the industry-wide semiconductor downturn which, has in
turn, resulted from geopolitical shifts, the lingering effects of the pandemic
in which inventory levels built up in the industry and increasing inflationary
pressure.
Impairment of intangibles of £3.4m (2021: £7.4m) relates to the impairment
of distributed feedback laser technology development costs where the Group has
taken the decision to discontinue the development and commercialisation of the
technology. The impairment in 2021 related to the write-down in value of the
Group's cREO™ filter technology development cost and patent assets totalling
£4.7m and the impairment of Photonic quasi crystal technology-related
development costs and patent assets totalling £2.7m.
A reported operating loss of £73.0m has been incurred (2021: £20.0m),
primarily due to the non-cash impairment of goodwill of £62.7m. Reflecting
the adjustments noted above, an adjusted operating loss of £3.6m in 2022
compares to an adjusted operating loss of £6.5m in 2021. The reduction in the
loss principally reflects the positive impact of a favourable shift in sales
mix and a foreign exchange tailwind at a gross profit level partially offset
by increases in SG&A expenses. The segmental analysis in note 3 reflects
the adjusted operating margins for the primary segments (before central
corporate support costs). Photonics-adjusted operating margins increased from
2.6% in 2021 to 12.6% in 2022 reflecting a combination of improved capacity
utilisation and favourable customer and product mix. Wireless-adjusted
operating margins declined from 8.8% in 2021 to 6.2% in 2022, primarily
reflecting reductions in volume and the associated under-utilisation of
certain manufacturing capacity. The Group is targeting a reduction in
under-utilised capacity through the closure of both the Singapore
manufacturing site (completed in mid-2022) and the Pennsylvania site (due to
be completed by 2024).
Finance costs of £2.4m (2021: £2.2m) reflect £1.1m (2021: £0.9m) of bank
and other interest costs and the interest expense on lease liabilities of
£1.3m (2021: £1.3m). Bank and other interest costs principally relate to the
Group's HSBC Bank plc revolving credit and asset finance facilities with the
increase in interest cost reflecting a combination of an increase in net debt
and an increase in the interest rate as both the Bank of England Base Rate and
the Sterling Overnight Index Average ('SONIA') interest rate benchmarks have
increased during the year.
The tax credit of £0.9m (2021: £8.8m charge) consists of a current tax
charge of £0.1m (2021: £1.1m) primarily relating to taxable profits
generated by the Group's Taiwanese operations and a deferred tax credit of
£1.0m (2021: £7.7m charge). Deferred tax asset recognition has been
restricted in the UK to £nil to reflect future forecast profitability, an
assessment that includes the impact of market softness in trading forecasts as
a result of the industry-wide semiconductor downturn and the impact of the
Group's consolidation and investment in central and functional roles, whilst
US deferred tax asset recognition has been restricted to £nil to reflect
lower future forecast profitability arising from a combination of market
softness, the Group's consolidation of its US manufacturing operations and the
continued shift in the balance of future forecast manufacturing and hence
profits from the Group's US operations to its UK and Asian operations. The
effective tax rate of 1.1% (2021: 13.3%) applicable to the tax credit of
£0.8m (2021: £1.8m) on adjusted items is less than the UK statutory tax rate
of 19%, primarily due to the non-recognition of deferred tax assets for
current year UK, US and Singapore trading losses which include the adjusted
Chief Executive Officer recruitment, Singapore and Pennsylvania site closure
costs and intangible asset impairments.
The increase in the loss for the year to £74.5m (2021: £31.0m) reflects a
combination of the underlying trading performance noted above and the impact
of adjusted non-cash and other non-operational items, which at an adjusted
level, has reduced the loss to £5.9m (2021: £19.3m).
Basic and diluted loss per share has increased from a loss per share of 3.87p
to a loss per share of 9.27p in the current year with adjusted basic and
diluted loss per share of 0.74p (2021: 2.41p), reflecting the Group's loss at
a statutory and adjusted profit level.
Cash generated from operations decreased in the year to £8.9m (2021:
£18.9m), reflecting the Group's favourable trading performance offset by
adverse working capital and the cash impact of adjusted non-operational items.
The Group has continued to invest in growing capacity to meet demand with
capital expenditure of £9.4m (2021: £15.1m) principally focused in Taiwan
and Massachusetts to support future growth opportunities, intangible asset
expenditure of £4.7m (2021: £0.3m) focused on a combination of intellectual
property and the Group's multi-year strategic IT transformation programme and
investment in targeted capitalised technology development of £3.8m (2021:
£3.0m).
The decrease in cash generated from operations, combined with investing
activity cash costs of £10.7m (2021: £18.3m) and repayment of lease
liabilities of £4.9m (2021: £3.7m), net of net proceeds from bank borrowings
of £9.6m (2021: £6.1m repayment), have combined to maintain the Group's cash
position of £11.6m (2021: £10.8m), but increase net debt (excluding lease
liabilities and derivative financial instruments) from £5.8m to £15.2m as at
31 December 2022.
Since the year end, the Group has experienced a deepening of the market
softness that has impacted 2022, resulting in an increase in the Group's net
debt position prior to the ongoing steps that are being taken to strengthen
the balance sheet of the Group. The proposed £30m equity fundraise and
completed refinancing of the Group's £28.7m ($35m) multi-currency revolving
credit facility provided by HSBC Bank plc provide the necessary liquidity for
the business to continue to operate and invest in its growth and
diversification strategy.
Equity shareholder funds total £175.1m (2021: £234.6m) with the movement
from 2021 primarily reflecting the loss for the year and foreign exchange
differences arising on the retranslation of net investments in overseas
subsidiaries.
Financial Statements
Financial summary
2022 2021
£m £m
Revenue 167.5 154.1
Adjusted EBITDA (see below) 23.4 18.7
Operating (loss)/profit
• Adjusted* (3.6) (6.5)
• Reported (73.0) (20.0)
(Loss)/profit after tax
• Adjusted* (5.9) (19.3)
• Reported (74.5) (31.0)
Net cash flow from operations
Adjusted* (note 4) 15.7 17.9
Reported 8.9 18.9
Free cash flow**
Before exceptional cash flows 4.2 (1.7)
Reported (2.6) (0.7)
Adjusted net (debt)/cash*** (15.2) (5.8)
Equity shareholders' funds 175.1 234.6
Basic EPS - adjusted**** (0.74p) (2.41p)
Basic EPS - unadjusted (9.27p) (3.87p)
Diluted EPS - adjusted**** (0.74p) (2.41p)
Diluted EPS - unadjusted (9.27p) (3.87p)
* The adjusted performance measures for 2022 and 2021 are
reconciled in note 4.
** Free cash flow is defined as net cash outflow of £0.1m (2021:
£14.1m outflow) before cash flows from financing activities of £4.7m (2021:
outflow of £11.2m) and net interest paid of £2.2m (2021: £2.2m).
*** Adjusted net (debt)/cash is defined as cash less borrowings but
excluding lease liabilities and fair value gains/losses on derivative
instruments.
**** Adjusted EPS measures exclude the impact of
certain non-cash charges, non-operational items and significant infrequent
items that would distort period on period comparability (see note 5).
Consolidated income statement for the year ended 31 December 2022
2022 2021
£m £m
Revenue 167.5 154.1
Cost of sales (141.1) (136.5)
Gross profit 26.4 17.6
Selling, general and administrative expenses (31.2) (30.3)
Impairment loss on intangible assets (66.2) (7.4)
Impairment (loss)/reversal on trade receivables and contract assets (2.3) -
Profit on disposal of intangible assets and property, plant and equipment 0.7 0.1
Other losses (0.4) -
Operating loss (73.0) (20.0)
Finance costs (2.4) (2.2)
Adjusted loss before income tax (6.0) (8.7)
Adjustments (69.4) (13.5)
Loss before income tax (75.4) (22.2)
Taxation 0.9 (8.8)
Loss for the year (74.5) (31.0)
Loss attributable to:
Equity shareholders (74.5) (31.0)
(74.5) (31.0)
Loss per share attributable to owners of the parent during the year
Basic loss per share (9.27p) (3.87p)
Diluted loss per share (9.27p) (3.87p)
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.
Consolidated statement of comprehensive income for the year ended 31 December
2022
2022 2021
£'000 £'000
Loss for the year (74.5) (31.0)
Exchange differences on translation of foreign operations* 14.5 4.7
Total comprehensive expense for the year (60.0) (26.3)
Total comprehensive expense attributable to:
Equity shareholders (60.0) (26.3)
(60.0) (26.3)
* Items that may subsequently be reclassified to profit or loss.
Items in the statement above are disclosed net of tax.
Consolidated balance sheet as at 31 December 2022
2022 2021
£m £m
Non-current assets
Intangible assets 37.0 95.9
Fixed asset investments - -
Property, plant and equipment 127.1 129.7
Right of use assets 41.4 44.3
Deferred tax assets - -
Other financial assets - -
Total non-current assets 205.5 269.9
Current assets
Inventories 34.2 31.7
Trade and other receivables 44.8 38.9
Cash and cash equivalents 11.6 10.8
Total current assets 90.6 81.4
Total assets 296.1 351.3
Current liabilities
Trade and other payables (37.6) (37.1)
Current tax liabilities (0.7) (1.3)
Bank borrowings (6.2) (6.2)
Derivative financial instruments (0.4) -
Lease liabilities (4.8) (4.7)
Provisions for other liabilities and charges (1.6) (3.7)
Total current liabilities (51.3) (53.0)
Non-current liabilities
Bank borrowings (20.6) (10.4)
Lease liabilities (46.0) (49.7)
Deferred tax liabilities (1.1) (2.1)
Provisions for other liabilities and charges (2.0) (1.5)
Total non-current liabilities (69.7) (63.7)
Total liabilities (121.0) (116.7)
Net assets 175.1 234.6
Equity attributable to the shareholders of the parent
Share capital 8.0 8.0
Share premium 154.7 154.6
Retained earnings (45.2) 29.3
Exchange rate reserve 40.5 26.0
Other reserves 17.1 16.7
Total equity 175.1 234.6
Consolidated statement of changes in equity for the year ended 31 December
2022
Share Share premium Retained Exchange Rate reserve Other reserves Total
capital
earnings / (losses)
equity
£m
£m £m
£m £m £m
At 1 January 2022 8.0 154.6 29.3 26.0 16.7 234.6
Comprehensive expense
Loss for the year - - (74.5) - - (74.5)
Other comprehensive expense for the year - - - 14.5 - 14.5
Total comprehensive expense for the year - - (74.5) 14.5 - (60.0)
Transactions with owners
Share based payments - - - - 0.3 0.3
Tax relating to share options - - - - 0.1 0.1
Proceeds from shares issued - 0.1 - - - 0.1
Total transactions with owners - 0.1 - - 0.4 0.5
At 31 December 2022 8.0 154.7 (45.2) 40.5 17.1 175.1
Share Share premium Retained earnings Exchange Rate Other reserves Total
capital
reserve
equity
£m £m
£m
£m £m £m
At 1 January 2021 8.0 154.2 62.1 21.3 14.9 260.5
Comprehensive expense
Loss for the year - - (31.0) - - (31.0)
Other comprehensive expense for the year - - - 4.7 - 4.7
Total comprehensive expense for the year - - (31.0) 4.7 - (26.3)
Transactions with owners
Share based payments - - - - 1.9 1.9
Tax relating to share options - - - - (0.1) (0.1)
Proceeds from shares issued - 0.4 - - - 0.4
Acquisition of non-controlling interest - - (1.8) - - (1.8)
Total transactions with owners - 0.4 (1.8) - 1.8 0.4
At 31 December 2021 8.0 154.6 29.3 26.0 16.7 234.6
Other reserves relate to share based payments.
Consolidated cash flow statement for the year ended 31 December 2022
2022 2021
£m £m
Cash flows from operating activities
Adjusted cash inflow from operations 15.7 17.9
Cash impact of adjustments (6.8) 1.0
Cash generated from operations 8.9 18.9
Net interest paid (2.2) (2.2)
Income tax paid (0.8) (1.3)
Net cash generated from operating activities 5.9 15.4
Cash flows from investing activities
Purchase of property, plant and equipment (9.4) (15.1)
Purchase of intangible assets (4.7) (0.3)
Capitalised development expenditure (3.8) (3.0)
Proceeds from disposal of property, plant and equipment and intangible assets 7.2 0.1
Adjusted cash used in investing activities (16.8) (18.3)
Cash impact of adjustments - proceeds from disposal of property, plant and 6.1 -
equipment and intangible assets
Net cash used in investing activities (10.7) (18.3)
Cash flows from financing activities
Acquisition of minority interest - (1.8)
Proceeds from issuance of ordinary shares 0.1 0.4
Proceeds from borrowings 15.8 -
Repayment of borrowings (6.2) (6.1)
Payment of lease liabilities (4.9) (3.7)
Net cash generated from / (used in) financing activities 4.8 (11.2)
Net decrease in cash and cash equivalents - (14.1)
Cash and cash equivalents at 1 January 10.8 24.7
Exchange losses on cash and cash equivalents 0.8 0.2
Cash and cash equivalents at 31 December 11.6 10.8
Notes to the financial statements for the year ended 31 December 2022
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.
2. Significant accounting policies
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have been
consistently applied to all years presented.
2.1 Basis of preparation
The financial statements have been prepared and approved by the directors in
accordance with international accounting standards in conformity with UK
adopted international accounting standards ("UK adopted IFRS"). The financial
statements have been prepared under the historical cost convention except
where fair value measurement is required by IFRS.
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group's accounting
policies.
2.2 Going concern
The financial statements are prepared on a going concern basis as the
Directors believe that the Group has a strong strategy, exciting future
opportunities and are taking the necessary steps to capitalise the Group with
sufficient liquidity to navigate the current temporary semiconductor industry
downturn. Without taking these steps, a material uncertainty exists around the
going concern status of operations in the current semiconductor market
downturn, related to the low level of liquidity headroom and bank covenant
compliance in base case financial forecasts and the uncertainty over timing of
the anticipated market recovery. The Group is currently experiencing weaker
customer demand and a reduction in customer orders and forecasts as a result
of the industry downturn.
The Directors consider that the current industry and economic outlook presents
a temporary but significant challenge to sales volumes in the first half of
2023. The Group's trading in Q1 2023 has experienced a deepening of the market
softness that impacted the latter part of 2022 as weaker customer demand,
orders and forecasts are expected to result in a year-on-year decline in
revenue of approximately £30.0m in H1 2023 prior to an anticipated
improvement in market dynamics and customer demand in H2 2023.
The Directors have taken steps, and plan to take further steps to strengthen
the balance sheet of the Group in order to mitigate the material uncertainty
and associated financial impact of the current semiconductor market downturn.
Actions taken since the year-end:
• The implementation of cost cutting actions, including
staff redundancies, operational efficiencies and reductions in areas of
discretionary expenditure which are under the control of the Directors.
• Deferral of capital expenditure under the control of the
Directors.
The steps taken to capitalise the Group with sufficient liquidity are as
follows.
1. Refinancing of the Group's £28.7m ($35.0) multi-currency revolving
credit facility provided by HSBC Bank plc on 17 May 2023. The tenor of the
facility has been extended to 1 May 2026 in the event of a successful equity
fund raise of greater than £25.0m on or before 23rd May 2023. Quarterly
leverage and interest cover covenant tests will apply to the facility,
commencing at December 2023.
2. The Group is launching an equity fundraise via an accelerated
bookbuild process, immediately upon the announcement of these unaudited
preliminary financial statements. The Group is planning to raise £30.0m via
the Placing in order to ensure that the Company can continue to invest to
execute on its strategy, meet its near-term liquidity requirements and deliver
a sustainable balance sheet position going forward.
In the event that less than £25.0m of equity is raised, the tenor of the
facility will be to 1 May 2025 and the new facility will be subject to a
minimum monthly liquidity requirement of a £3.0m cash holding, with quarterly
leverage and interest cover covenant tests commencing at June 2023. In this
scenario, the Group would work with the relationship lending bank to navigate
forecast covenant breaches.
In the year to 31 December 2022, reported revenue growth of 9% was recorded,
although the Group has reported an operating loss of £73.0m for the year
(2021: £20.0m loss). This includes a non-cash impairment charge of £62.7m
related to the write-down of goodwill, which results from a change in
forecasts related to the current semiconductor industry downturn. The Group
increased its net debt position (excluding lease liabilities and fair value
gains/losses on derivative instruments) to £15.2m (2021: £5.8m). At 31
December 2022 the Group had undrawn committed funding of £12.4m ($15.0m)
available under the terms of its credit facilities.
In assessing the going concern basis of preparation the Directors have
reviewed financial projections to 31 December 2024 ('the going concern
assessment period'), containing both a 'base case' and a 'severe but plausible
downside case'. The going concern assessment period extends beyond the
minimum required 12-month period from the date of approval of the financial
statements to protect against the recovery in the semiconductor market
occurring later than forecast by the Directors.
Base Case
The base case is the Group's Q1 2023 Board approved 2023 and 2024 forecasts.
The base case incorporates the impact of current market softness, weak
customer demand and post year end actions, including the refinancing of the
Group's bank facilities, taken by the Directors but does not include the
mitigating impact of the £30.0m equity fund raise planned by the Directors.
The base case was prepared with the following key assumptions:
· Revenue for 2023 in line with current analyst consensus, with a
forecast return to year-on-year growth in 2024
· Direct wafer product margins consistent with 2022
· Labour inflation in 2024 in line with labour market norms
· Cost inflation in operating and administrative costs in line with
the current inflationary environment
· Mitigating cost actions, resulting in a reduction in total
overheads by c.7% year-on-year in 2023, despite inflationary pressures in some
cost categories
· c.£15.0m of capital expenditure in 2023 and 2024 reflecting a
combination of essential maintenance capital expenditure and investment in
Gallium Nitride (GaN) related manufacturing capacity, enabling diversification
into the high-growth power electronics and advanced display (uLED) markets
In the base case the Group is forecast to maintain low levels of funding
headroom throughout the going concern assessment period with liquidity of
£5.8m at the end of 2023 and £9.0m at the end of 2024. Liquidity during
periods of 2024 is forecast to be very limited and assumes that the existing
facilities remain available. The Group is forecast to breach its leverage,
interest cover and minimum monthly liquidity covenants in one or more periods
in 2023 and breach its minimum monthly liquidity covenant in more than one
period in 2024. Net debt (excluding lease liabilities and fair value
gains/losses on derivatives) is forecast to increase to a maximum of £30.7m
in Q4 2023 before declining to £27.1m at the end of 2023 and £19.7m at the
end of 2024.
Severe but plausible downside case
The severe but plausible downside case was prepared using the following key
assumptions:
· Revenue is assumed at 15% down on the base case for 2023 and 14%
down on the base case for 2024
· In line with the revenue reduction in both years, there is a
reflective reduction in variable operating costs for 2023 and 2024 along with
additional incremental cost savings that include idling of tools, labour
savings, reductions in research and development expenditure and reductions in
certain non-manufacturing related discretionary expenditure that can be
controlled by the Directors
· Deferral of certain capital expenditure in 2023 and 2024 that can
be controlled by the Directors
The severe but plausible downside case would leave the Group with insufficient
liquidity from Q3 2023 with additional liquidity of at least £19,313,000
required in the going concern assessment period assuming that the existing
facilities remain available. In the severe but plausible downside case the
group is forecast to breach its leverage, interest cover and minimum monthly
liquidity covenants in one or more periods in 2023 and 2024. Net debt
(excluding lease liabilities and fair value gains/losses on derivatives) is
forecast to increase to a maximum of £40.2m in 2023 and £48.0m in 2024.
Having reviewed the base case and severe but plausible downside case the
Directors of the Group have concluded that additional equity funding, in
combination with the completed refinancing of the Group's £28.7m ($35.0m)
multi-currency revolving credit bank facility, is required from the Group's
shareholders in order to avoid insufficient liquidity and covenant breaches
during the going concern assessment period. The Directors plan to raise
£30.0m through an equity fund raise to provide the necessary liquidity to
continue trading during the current semiconductor market downturn, provide
sufficient headroom to protect against the recovery occurring later than
forecast and provide sufficient headroom for the Group to operate in
compliance with its banking covenants. The Directors acknowledge that there
can be no certainty that the additional funding will be available, however,
they have no reason to believe that shareholders will not continue to remain
supportive at the date of approval of these financial statements.
In the event of a successful fundraise of £30.0m, the Group is forecasting to
maintain covenant compliance and have positive liquidity throughout the 2023
and 2024 going concern assessment period, in both base case and severe but
plausible downside scenarios.
The Directors have concluded that the uncertainty of the equity raise launched
on 17 May 2023 indicates the existence of a material uncertainty that may cast
significant doubt on the group's ability to continue as a going concern and,
therefore, that the group may be unable to realise its assets and discharge
its liabilities in the normal course of business. The Directors are confident
that shareholders will remain supportive and that sufficient funds will be
received through the equity raise and therefore have a reasonable expectation
that the Group has adequate resources to continue in operational existence for
the going concern assessment period. Accordingly, these financial statements
do not include any adjustments to the carrying amount or classification of
assets and liabilities that would result if the Group were unable to continue
as a going concern.
2.3 Changes in accounting policy and disclosures
a) 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
2022:
• 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 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 IFRSs 2018-2020 cycle 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 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
2023 and have not been applied in preparing these consolidated financial
statements:
• 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 and amendments to the disclosure of
accounting policies which will require disclosure of material rather than
significant accounting policies.
• Amendment to IAS 8 'Accounting policies, changes in
accounting estimates and errors' to introduce a new definition for accounting
estimates which clarifies that an accounting estimate is a monetary amount in
the financial statements that is subject to measurement uncertainty. Amendment
to IAS 12 'Income taxes' to clarify the accounting treatment for deferred tax
on certain transactions with a narrowing of the scope of the initial
recognition exemption so that it does not apply to transactions that give rise
to equal and offsetting temporary differences.
The Directors anticipate that at the time of this report none of the new
standards, amendments to standards or 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 Leadership
Team. The Executive Leadership Team, consisting of the Chief Executive
Officer, Chief Financial Officer, Chief Operations Officer, Chief Technology
Officer, Chief People Officer, Executive VP Global Business Development,
Sales, Executive VP Product Management and the Executive VP General Counsel
& company secretary, 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 silicon technologies.
The Executive Leadership Team 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 Leadership Team and therefore have not been disclosed.
3.2 Adjusted Operating Loss
Adjusted operating loss excludes the effects of significant non-cash,
non-operational or significant and infrequent items of income and expenditure
which may have an impact on the quality of earnings, such as restructuring
costs, CEO recruitment costs and impairments where the impairment is the
result of an isolated, non-recurring event. Adjusted operating loss also
excludes the effects of equity settled share-based payments.
Finance costs are not allocated to segments because treasury and the cash
position of the group is managed centrally.
Revenue 2022 2021
£m £m
Wireless 76.0 83.2
Photonics 88.7 68.1
CMOS++ 2.8 2.8
Revenue 167.5 154.1
Adjusted operating loss
Wireless 4.7 7.3
Photonics 11.1 1.7
CMOS++ (1.5) (0.6)
Central corporate costs (17.9) (14.9)
Adjusted operating loss (3.6) (6.5)
Adjusted items (see note 4)
Wireless (63.8) (8.1)
Photonics (5.4) (3.9)
CMOS++ - -
Central corporate costs (0.2) (1.5)
Operating loss (73.0) (20.0)
Finance costs (2.4) (2.2)
Loss before tax (75.4) (22.2)
4. Alternative performance measures
The Group's results report certain financial measures before a number of
adjusted items that are not defined or recognised under IFRS, including
adjusted earnings before interest, tax, depreciation and amortisation,
adjusted earnings before interest, tax, depreciation and amortisation margin,
adjusted operating loss, adjusted loss before income tax and adjusted losses
per share. The Directors believe that the adjusted performance measures
provide a 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
performance 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
performance measures and the impact on the Group's reported financial
performance.
Adjusted Adjusted 2022 Adjusted Adjusted 2021
Results Items Reported Results Items Reported
£m £m Results £m £m Results
£m £m
Revenue 167.5 - 167.5 154.1 - 154.1
Cost of sales (141.0) (0.1) (141.1) (135.4) (1.1) (136.5)
Gross profit 26.5 (0.1) 26.4 18.7 (1.1) 17.6
SG&A (26.8) (4.4) (31.2) (25.3) (5.0) (30.3)
Impairment of intangibles - (66.2) (66.2) - (7.4) (7.4)
Impairment of receivables (2.3) - (2.3) - - -
Other losses (0.4) - (0.4) - - -
Profit on disposal of PPE and intangibles (0.6) 1.3 0.7 0.1 - 0.1
Operating loss (3.6) (69.4) (73.0) (6.5) (13.5) (20.0)
Finance costs (2.4) - (2.4) (2.2) - (2.2)
Loss before tax (6.0) (69.4) (75.4) (8.7) (13.5) (22.2)
Taxation 0.1 0.8 0.9 (10.6) 1.8 (8.8)
Loss for the period (5.9) (68.6) (74.5) (19.3) (11.7) (31.0)
Pre-tax Tax 2022 Pre-tax Tax 2021
Adjustment Impact Adjusted Adjustment Impact Adjusted
£m £m Results £m £m Results
£m £m
Share-based payments (0.2) (0.2) (0.4) (1.7) - (1.7)
Share-based payments - CEO recruitment (0.1) - (0.1) - - -
CEO Recruitment (0.1) - (0.1) (0.7) - (0.7)
Impairment - goodwill (62.7) - (62.7) - - -
Impairment - other intangibles (3.4) 0.7 (2.7) (7.4) 1.8 (5.6)
Restructuring (4.2) - (4.2) (3.7) - (3.7)
Restructuring - profit on disposal of PPE 1.3 0.3 1.6 - - -
Total (69.4) 0.8 (68.6) (13.5) 1.8 (11.7)
The nature of the adjusted items is as follows:
• Share-based payments - The charge (2021: charge) relates
to share-based payments recorded in accordance with IFRS 2 'Share-based
payment' of which £0.1m (2021: £1.1m) has been classified within cost of
sales in gross profit and £0.1m (2021: £0.6m) has been classified as
selling, general and administrative expenses in operating profit. £nil cash
has been defrayed in the year (2021: £0.1m) in respect of employer social
security contributions following the exercise of unapproved employee share
options.
• Chief Executive Officer recruitment - Chief Executive
Officer recruitment costs include the Chief Executive Officer's starting bonus
of £1.0m, of which £0.2m relates to a share-based award and £0.8m relates
to a cash award payable over the first three years of employment, costs
associated with the transition of the former Chief Executive to a
non-executive role and recruitment fees. The charge of £0.2m (2021: £0.7m)
includes share award and cash costs associated with the new Chief Executive
Officer's starting bonus of £0.4m (2021: £nil), settlement costs and legal
fees of £nil (2021: £0.3m) associated with the transition of the former
Chief Executive Officer to a non-executive role and a credit of £0.2m (2021:
£0.4m fees) relating to external recruitment fees. Cash costs defrayed in the
period total £0.7m (2021: £0.2m).
• Restructuring - The charge of £4.2m (2021: £3.7m)
relates to restructuring costs associated with the announced closure of the
Group's manufacturing facility in Pennsylvania, USA and the closure of the
Group's manufacturing facility in Singapore.
- Restructuring charges of £1.2m (2021: £0.7m) relate to
employee related costs associated with 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 £0.6m (2021: £0.3m).
- Restructuring charges of £3.0m (2021: £3.0m) consist of
employee related costs of £0.2m (2021: £1.5m), site-decommissioning costs of
£1.5m (2021: £1.5m), asset write downs of £0.9m (2021: £nil) and asset
transfer costs of £0.4m (2021: £nil) relating to the announced closure of
the Group's manufacturing facility in Singapore. The charge was classified as
selling, general and administrative expenses within operating loss. Cash costs
defrayed in the year total £5.1m (2021: £nil).
- Restructuring profits on disposal of £1.3m (2021: £nil)
consist of the sale of assets in Singapore following the cessation of trade in
the year and the sale of assets in North Carolina to facilitate the
consolidation of the Group's manufacturing operations from Pennsylvania.
Proceeds received in the year total £6.1m (2021: £nil) with a profit on
disposal of £1.3m (2021: £nil) classified within 'Profit on disposal of
intangible assets and property, plant and equipment'.
• Impairment of goodwill - The non-cash charge of £62.7m
(2021: £nil) relates to impairment costs associated with the Wireless CGU.
• Impairment of other intangibles - The non-cash charge of
£3.4m (2021: £7.4m) relates to the impairment of certain technology
development costs and intellectual property patent assets.
- The non-cash impairment charge of £3.4m relates to the
impairment of distributed feedback laser technology development costs where
the Group has taken the decision to discontinue the development and
commercialisation of the technology.
- The prior year non-cash impairment charge of £7.4m related to
the impairment of cREO™ filter technology development costs and patent
assets and the impairment of Photonic quasi crystal technology related
development cost where the Group had taken the decision to pause development
related activities which have not recommenced in the current period given the
lack of visibility over the timeline to commercialisation of each of the
technologies.
• The cash impact of adjusted items in the consolidated cash
flow statement represent costs associated with the recruitment of the group's
new Chief Executive Officer (£0.7m), onerous contract royalty payments
related to the Group's cREO™ technology (£0.4m), payment of employee
related costs associated with the announced closure of the Group's site in
Pennsylvania (£0.6m) and payment of employee and site related decommissioning
costs associated with the closure of the Group's manufacturing facility in
Singapore (£5.1m) net of the sale proceeds associated with certain items of
plant and equipment sold as part of the closure of the Group's manufacturing
facility in Singapore (£6.1m).
Adjusted EBITDA (adjusted earnings before interest, tax, depreciation and
amortisation) is calculated as follows:
2022 2021
£m £m
Loss attributable to equity shareholders (74.5) (31.0)
Finance costs 2.4 2.2
Tax (0.9) 8.8
Depreciation of property, plant and equipment 14.5 13.4
Depreciation of right of use assets 4.0 3.9
Amortisation of intangible fixed assets 7.8 8.0
Loss/(profit) on disposal of PPE and intangibles* 0.7 (0.1)
Adjusted Items 69.4 13.5
Share-based payments 0.2 1.7
Share-based payments - Chief Executive Officer recruitment 0.1 -
Chief Executive Officer recruitment 0.1 0.7
Restructuring 4.2 3.7
Restructuring - profit on disposal of PPE (1.3) -
Impairment of intangibles 66.1 7.4
Adjusted EBITDA 23.4 18.7
Adjusted EBITDA margin 14% 12%
*Excludes the adjustment 'Restructuring - profit on disposal of PPE' which is
separately disclosed as part of the groups adjusted items.
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. The Directors believe that the adjusted
earnings per share measure provides a useful comparison of performance and
allows 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 adjustments are detailed in
note 4.
2022 2021
£m £m
Loss attributable to ordinary shareholders (74.5) (31.0)
Adjustments to loss after tax (note 4) 68.6 11.7
Adjusted loss attributable to ordinary shareholders (5.9) (19.3)
2022 2021
Number Number
Weighted average number of ordinary shares 804,466,357 801,653,662
Dilutive share options 8,797,413 4,097,303
Adjusted weighted average number of ordinary shares 813,263,770 805,750,965
Adjusted basic loss per share (0.74p) (2.41p)
Basic loss per share (9.27p) (3.87p)
Adjusted diluted loss per share (0.74p) (2.41p)
Diluted loss per share (9.27p) (3.87p)
6. Cash generated from operations
Group 2022 2021
£m £m
Loss before tax (75.4) (22.2)
Finance costs 2.4 2.2
Depreciation of property, plant and equipment 14.5 13.4
Depreciation of right of use assets 4.0 3.9
Amortisation of intangible assets 7.8 8.0
Impairment of intangible assets 66.2 7.4
Impairment of PP&E - 0.1
Inventory write downs 2.8 0.8
Non-cash movement on trade receivable expected credit losses 2.3 -
Non-cash provision movements 3.1 3.6
Profit on disposal of fixed assets (0.7) (0.1)
Share-based payments 0.3 1.7
Cash inflow from operations before changes in working capital 27.3 18.8
Increase in inventories (2.9) (1.3)
(Increase)/decrease in trade and other receivables (5.5) 2.9
Decrease in trade and other payables (3.9) (1.0)
Decrease in provisions (6.1) (0.5)
Cash inflow from operations 8.9 18.9
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2022 or 2021. The financial
information for 2021 is derived from the statutory accounts for 2021 which
have been delivered to the registrar of companies. The auditor has reported on
the 2021 accounts; their report was (i) unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their report and (iii) did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
The statutory accounts for 2022 will be finalised on the basis of the
financial information presented by the directors in this preliminary
announcement, with the exception of the description of going concern in the
basis of preparation. In the absence of the successful completion of the
proposed equity fundraise launched at the time of this announcement between
the date of this announcement and the authorisation of the financial
statements, those statutory accounts for 2022 are expected to include
reference to a material uncertainty relating to going concern and the
auditor's report on those accounts is expected to include reference to a
matter to which the auditor draws attention by way of emphasis without
qualifying their report in respect of that material uncertainty related to
going concern. Those statutory accounts will be delivered to the registrar of
companies in due course.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FLFFEESIDLIVRecent news on Iqe
See all newsREG - Takeover Panel - Disclosure Table
AnnouncementREG-Form 8.3 - [IQE PLC - 08 09 2025] - (CGAML)
AnnouncementREG - IQE PLC Citigroup Inc - IQE plc: Holding(s) in Company
AnnouncementREG - IQE PLC - IQE plc: Holding(s) in Company
AnnouncementREG - M&G PLC IQE PLC - Form 8.3 - IQE PLC
Announcement