REG - IQE PLC - IQE plc: FY 2024 Financial Results
13/05/2025 07:02
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RNS Number : 3484I IQE PLC 13 May 2025
IQE plc
Cardiff, UK
13 May 2025
Full Year 2024 Results
- Improved year-on-year profitability in line with expectations
- Jutta Meier appointed CEO
IQE plc (AIM: IQE, "IQE" or the "Group"), the leading global supplier of
compound semiconductor wafer products and advanced material solutions, today
announces its results for the full year ended 31 December 2024.
FY 2024 Financial Summary:
FY 2024 FY 2023 Change
£'m
£'m
(%)
Revenue 118.0 115.3 2.4
Adjusted EBITDA(1) 8.1 4.3 88.1
Adjusted loss before tax (22.3) (23.2)
Reported loss before tax (36.9) (28.8)
Adjusted net cashflow from operations 6.1 15.7
Reported net cashflow from operations 1.3 10.1
Cash capital expenditure(2) 11.4 12.2
Adjusted net debt(3) (18.8) (2.2)
Cash and cash equivalents 4.7 5.6
Reported Diluted EPS (3.96p) (3.28p)
Adjusted Diluted EPS (2.46p) (2.68p)
1. Adjusted EBITDA is earnings before interest, tax, depreciation,
amortisation and certain non-cash charges, non-operational items and
significant infrequent items set out in Note 4 in the financial statements
section.
2. Cash capital expenditure stated is Property, Plant and Equipment cash
capex.
3. Adjusted net debt is calculated as cash less borrowings but excluding lease
liabilities and fair value gains/losses on derivative instruments.
Jutta Meier, Chief Executive Officer and Chief Financial Officer of IQE,
commented:
"IQE delivered a solid set of financials in line with our January 2025 trading
update. Our focus has been on reducing costs and optimising our footprint, and
I am pleased to see this has resulted in an improved adjusted EBITDA position
year-on-year.
The Strategic Review remains ongoing and we have been encouraged by progress
so far despite a challenging macro environment. IQE has a strong foundation
from which to unlock value for all of our stakeholders and with a diverse
customer pipeline, the continued end-market demand for our technology gives us
confidence for the future. I am also delighted to be appointed as CEO as we
continue to deliver on the positive progress we have made."
FY 2024 Financial Highlights:
· Revenue for FY 2024 was broadly flat at £118.0m (FY 2023: £115.3m).
‒ Wireless revenue of £67.3m (FY 2023: £53.9m) increased 25%
year-on-year reflecting an increase in wireless GaAs sales linked to a higher
penetration of Asian markets and an increase in GaN sales for 5G
infrastructure.
‒ Photonics revenue of £49.9m (FY 2023: £59.1m) decreased 16%
year-on-year primarily because of softness in 3D Sensing and telecoms
infrastructure markets, partially offset by a strong performance in Aerospace
and Security markets for infrared-related products.
‒ CMOS++ revenue of £0.8m (FY 2023: £2.3m) was down 62% on a
reported basis which reflects a strategic rebalancing of the business' product
portfolio and a shift in focus towards diversification into GaN Power and
MicroLED. In FY 2025 IQE will no longer reporting CMOS++ revenue as a
standalone segment.
· Adjusted EBITDA of £8.1m (FY 2023: £4.3m), an increase of 88%
year-on-year primarily reflects the annualised impact of prior year cost
mitigation actions and the implementation of additional cost management in the
current year.
· Adjusted EBITDA margin of 7% (FY 2023: 4%) reflects the impact of
actions to reduce costs and align capacity with customer volumes alongside
consolidation of our manufacturing sites.
· Reported operating loss of £33.0m (FY 2023: £25.8m) impacted by
non-cash asset impairments of £3.1m related to the Group's US Wireless assets
and restructuring costs of £7.6m, including non-cash intangible and tangible
asset impairments of £5.4m related to the consolidation of the Group's
manufacturing operations.
· Reported net cashflow from operations of £1.3m (FY 2023: £10.1m)
decreased in the year, reflecting inventory build to support 2025 deliveries.
· Cash capital expenditure (PP&E) of £11.4m (FY 2023: £12.2m) to
support the Group's strategic GaN diversification and growth strategy.
· Adjusted net debt of £18.8m as at 31 December 2024 (FY 2023: net
debt of £2.2m) with an undrawn balance of $5.5m (£4.4m) on the Group's
Revolving Credit Facility.
· Convertible loan note financing of £18.0m (gross proceeds) completed
in March 2025 to strengthen IQE's near-term financial position.
· Cash and cash equivalents of £20.6m as at 31 March 2025 following
receipt of CLN proceeds.
· Cost control and cash generation
‒ Restructuring of the Group's Executive Leadership Team
‒ Headcount restructuring resulting in over 10% total reduction
‒ Adjusted SG&A reductions of 8% focused on discretionary
non-labour expenses and headcount reductions.
‒ Asset optimisation, including consolidation of capacity,
restructuring of manufacturing shift patterns and the sale of excess tools
resulting from site consolidation
· Global site optimisation programme
‒ Completion of the consolidation of Pennsylvania MBE operations
into North Carolina site with customer qualifications complete and production
ramped
‒ Sale of the Pennsylvania manufacturing site completed in December
2024 for $5.5m (£4.4m)
‒ Strategic repositioning of the Massachusetts and North Carolina
sites
‒ Commencement of the consolidation of the Group's South Wales
activities into its Newport manufacturing site
Business update:
· Connect
‒ Launched Quantum Dot Laser foundry service for high-efficiency
optical communications in data centres with opportunity to take significant
market share from incumbent laser technologies.
‒ Expansion of GaN RF Aerospace & Security business serving
fast-growing end-market, including satellite internet constellation platforms
(Low Earth Orbit Satellites - LEOS).
‒ Qualification of high-performance HBTs for power amplifiers in
next-generation 5G smartphones, underpinned by growing customer demand for HBT
portfolio serving Wi-Fi7 markets.
· Sense
‒ Development of InP and GaSb laser and detector technologies with
leading consumer OEM for healthcare sensing applications.
‒ Strong progress with qualification of second-generation 3D Sensing
VCSEL for mobile handset and tablet platforms.
‒ Secured long term agreements with two leading Infrared sensing
customers supported by largest purchase orders to date.
· Power
‒ Joint Development Agreement with X-FAB to create a Europe-based
GaN Power device platform solution for automotive, data centres and consumer
applications.
‒ First commercial orders received with 650V HEMT automotive
qualifications and GaN Power capacity under qualification for delivery into
IDM foundry partners.
· Display
‒ Launch of 8" GaN-on-Si microLED foundry service with in-house
wafer cleaning, compatible with advanced Silicon CMOS manufacturing.
‒ Partnership extension with annual purchase order commitment from
leading AR smart glasses designer for GaN based microLED displays.
‒ Expansion of microLED customer pipeline with new qualification
orders secured, served by increasing UK and US capacity for GaN product
development.
Update on Strategic Review:
As previously announced, the Group is currently conducting a comprehensive
Strategic Review of its asset base to ensure a strong capital position to
further invest in core operations. As part of the Strategic Review, IQE is
prioritising the possibility of a full sale of IQE Taiwan, alongside a
potential IPO. The Board is leading the Strategic Review and continues to be
advised by Lazard. While there can be no certainty as to the outcome of the
Strategic Review, the Board is currently evaluating a range of proposals and
will provide a further update when appropriate.
Board update:
The Board is pleased to announce that Jutta Meier will immediately become
IQE's Chief Executive Officer following her successful period as Interim CEO.
Jutta will continue in her dual role as CEO and CFO. Female representation on
IQE's Board now stands at an above average 57%.
Mark Cubitt will continue to act as Executive Chair, providing support to
Jutta and the Executive Leadership Team through the ongoing Strategic Review.
The composition of the Board will be re-evaluated following the conclusion of
the Strategic Review.
Jutta and Mark received salary/fee adjustments from 1 May 2025 to reflect
their increased responsibilities and workloads. With the Board's agreement and
effective from 1 July until 31 December 2025, both have opted for their pay
adjustments to be received as share options under the Group's existing share
option scheme. The options will vest monthly but will not be exercisable until
the start of 2026, and the number of share options granted will be uplifted to
take account of exercise costs and, for Jutta only, her lost employer's
pension contributions. Other members of the Executive Leadership Team have
also opted for their pay to be received in share options under the same
conditions.
Mark Cubitt, Executive Chair of IQE, commented:
"I would like to recognise Jutta's success as CEO of IQE since she took on the
interim role over six months ago. The Board felt she was an excellent
candidate and in that time she has stabilised and refocused the business and
rebuilt confidence with both customers and employees. I am pleased to continue
to work alongside her as IQE's Executive Chair to deliver on our strategy, and
I remain encouraged by the progress of our Strategic Review and its potential
to unlock the untapped value within the Group.
Current trading and outlook:
Global markets are being impacted by macroeconomic uncertainty and as a
result, some end customer demand is being fulfilled with existing inventory.
This was visible in Q1 trading but is expected to correct in H2 2025. Costs
and capacity continue to be optimised to improve margins and cashflow.
IQE's customer pipeline remains strong and is predicted to grow in H2 2025,
driven by new product and customer engagements. Additionally, existing
segments including Aerospace and Security and optical communications are also
expected to deliver growth, offsetting anticipated softness in wireless
segments resulting from challenged consumer markets, particularly in Asia.
There is currently no direct impact to IQE from the implementation of US
tariffs, however developments are being closely monitored and options are
being explored with both suppliers and customers to mitigate any potential
risk.
Revenue and adjusted EBITDA for the full year are expected to be within the
range of analyst forecasts for FY 2025(1), with weighting towards H2
consistent with the destocking seen in Q1 and typical industry seasonality.
These forecasts assume the inclusion of IQE Taiwan revenues pending the
outcome of the Strategic Review.
1. The analyst range of expectations for FY 2025 revenue are from £115.1m to
£123.0m and for adjusted EBITDA from £7.4m to £10.0m.
Results Presentation:
IQE will present its FY 2024 Results via webcast at 10:00am today, Tuesday 13
May 2025. If you would like to view this webcast, please register by using the
below link and following the instructions:
https://brrmedia.news/IQE_FY_24 (https://brrmedia.news/IQE_FY_24)
Contacts:
IQE plc
+44 (0) 29 2083 9400
Mark Cubitt
Jutta Meier
Amy Barlow
Lazard (Financial Adviser)
+44 (0) 20 7187 2000
Cyrus Kapadia
Keiran Wilson
Alexander Fiallos
Peel Hunt (Nomad and Joint Broker)
+44 (0) 20 7418 8900
Ben Cryer
Kate Bannatyne
Adam Telling
Deutsche 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
GLOSSARY
GaN - Gallium Nitride
GaSb - Gallium Antimonide
InP - Indium Phosphide
ABOUT IQE
http://iqep.com
(https://www.globenewswire.com/Tracker?data=yZf7NKp1JKLALUCxlBuC8wkLnLAqoe5-kjjIlkMIDci9q9W0x_02bwZV-eorSbpLXZxy4zi3xHh-O4FM8nWjeg==)
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 manufacturing
locations in the UK, US and Taiwan, and is listed on the AIM Stock Exchange in
London.
Financial Review
Financial Statements
Financial Summary
2024 2023
£'000 £'000
Revenue 118,034 115,252
Adjusted EBITDA (see below) 8,112 4,313
Operating loss
• Adjusted* (18,357) (20,199)
• Reported (32,958) (25,779)
Loss after tax
• Adjusted* (23,734) (23,990)
• Reported (38,178) (29,378)
Net cash flow from operations
Adjusted* 6,087 15,744
Reported 1,282 10,074
Free cash flow**
Before adjusted* cash flows (4,948) (3,128)
Reported (9,753) (8,798)
Adjusted net debt*** (18,800) (2,228)
Equity shareholders' funds 134,110 169,785
Basic EPS - adjusted**** (2.46p) (2.68p)
Basic EPS - unadjusted (3.96p) (3.28p)
Diluted EPS - adjusted**** (2.46p) (2.68p)
Diluted EPS - unadjusted (3.96p) (3.28p)
* The adjusted performance measures for 2024 and 2023 are reconciled
in note 4.
** Free cash flow is defined as net cash outflow of £910,000 (2023:
£5,409,000) before cash inflows from financing activities of £12,160,000
(2023: £6,631,000) and net interest paid of £3,317,000 (2023: £3,242,000).
*** 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 2024
2024 2023
£'000 £'000
Revenue 118,034 115,252
Cost of sales (113,588) (112,924)
Gross profit 4,446 2,328
Selling, general and administrative expenses (29,982) (32,486)
Impairment loss on intangible assets (3,772) -
Impairment loss on property, plant and equipment (4,615) -
Impairment loss on right-of-use asset (31) -
Gain on remeasurement of right-of-use asset 202 -
Impairment (loss)/reversal on trade receivables and contract assets (3) 1,808
Gain on acquisition of remaining interest in CSC - 2,419
Profit on disposal of intangible assets and property, plant and equipment 797 152
Operating loss (32,958) (25,779)
Finance costs (3,947) (3,032)
Adjusted loss before income tax (22,304) (23,231)
Adjustments (14,601) (5,580)
Loss before income tax (36,905) (28,811)
Taxation (1,273) (567)
Loss for the year (38,178) (29,378)
Loss attributable to:
Equity shareholders (38,178) (29,378)
(38,178) (29,378)
Loss per share attributable to owners of the parent during the year
Basic loss per share (3.96p) (3.28p)
Diluted loss per share (3.96p) (3.28p)
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
2024
2024 2023
£'000 £'000
Loss for the year (38,178) (29,378)
Exchange differences on translation of foreign operations* (826) (8,088)
Total comprehensive expense for the year (39,004) (37,466)
Total comprehensive expense attributable to:
Equity shareholders (39,004) (37,466)
(39,004) (37,466)
* 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 2024
2024 2023
£'000 £'000
Non-current assets
Intangible assets 28,950 35,378
Property, plant and equipment 113,674 129,553
Right-of-use assets 42,210 37,895
Deferred tax assets - -
Total non-current assets 184,834 202,826
Current assets
Inventories 20,009 24,577
Trade and other receivables 37,424 38,220
Cash and cash equivalents 4,660 5,617
Assets held for resale 120 2,274
Total current assets 62,213 70,688
Total assets 247,047 273,514
Current liabilities
Trade and other payables (34,405) (42,572)
Current tax liabilities (428) (531)
Bank borrowings - (4,153)
Lease liabilities (5,658) (5,865)
Provisions for other liabilities and charges (774) (2,998)
Total current liabilities (41,265) (56,119)
Non-current liabilities
Trade and other payables (2,035) (2,208)
Bank borrowings (23,460) (3,692)
Lease liabilities (44,872) (40,435)
Deferred tax liabilities (774) (604)
Provisions for other liabilities and charges (531) (671)
Total non-current liabilities (71,672) (47,610)
Total liabilities (112,937) (103,729)
Net assets 134,110 169,785
Equity attributable to the shareholders of the parent
Share capital 9,672 9,615
Share premium 155,972 155,844
Retained earnings (85,644) (47,466)
Exchange rate reserve 31,621 32,447
Other reserves 22,489 19,345
Total equity 134,110 169,785
Consolidated statement of changes in equity for the year ended 31 December
2024
Share Share premium Retained Exchange Rate reserve Other reserves Total
capital
earnings / (losses)
equity
£'000
£'000 £'000
£'000 £'000 £'000
At 1 January 2024 9,615 155,844 (47,466) 32,447 19,345 169,785
Comprehensive expense
Loss for the year - - (38,178) - - (38,178)
Other comprehensive expense for the year - - - (826) - (826)
Total comprehensive expense for the year - - (38,178) (826) - (39,004)
Transactions with owners
Share-based payments - - - - 3,177 3,177
Tax relating to share options - - - - (33) (33)
Proceeds from shares issued 57 128 - - - 185
Total transactions with owners 57 128 - - 3,144 3,329
At 31 December 2024 9,672 155,972 (85,644) 31,621 22,489 134,110
Share Share premium Retained earnings/ Exchange Rate Other reserves Total
capital
reserve
equity
£'000 (losses)
£'000
£'000
£'000 £'000
£'000
At 1 January 2023 8,048 154,720 (45,246) 40,535 17,003 175,060
Comprehensive expense
Loss for the year - - (29,378) - - (29,378)
Other comprehensive expense for the year - - - (8,088) - (8,088)
Total comprehensive expense for the year - - (29,378) (8,088) - (37,466)
Transactions with owners
Share-based payments - - - - 2,484 2,484
Tax relating to share options - - - - (142) (142)
Proceeds/(charge) from shares issued 1,567 1,124 (1,342) - 28,500 29,849
Transfer of merger reserve to retained earnings - - 28,500 - (28,500) -
Total transactions with owners 1,567 1,124 27,158 - 2,342 32,191
At 31 December 2023 9,615 155,844 (47,466) 32,447 19,345 169,785
Other reserves relate to share-based payments.
Consolidated cash flow statement for the year ended 31 December 2024
2024 2023
£'000 £'000
Cash flows from operating activities
Adjusted cash inflow from operations 6,087 15,744
Cash impact of adjustments (4,805) (5,670)
Cash generated from operations 1,282 10,074
Interest paid (3,317) (3,242)
Income tax paid (841) (912)
Net cash generated from operating activities (2,876) 5,920
Cash flows from investing activities
Purchase of property, plant and equipment (11,359) (12,158)
Purchase of intangible assets (1,609) (3,113)
Capitalised development expenditure (1,877) (2,852)
Proceeds from disposal of property, plant and equipment and intangible assets 4,906 553
Acquisition of subsidiary, net of cash received* (255) (390)
Adjusted cash used in investing activities (15,022) (17,960)
Cash impact of adjustments - proceeds from disposal of property, plant and 4,828 -
equipment
Net cash used in investing activities (10,194) (17,960)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 185 31,239
Expenses associated with issue of ordinary shares - (1,390)
Proceeds from borrowings 19,493 9,932
Repayment of borrowings (4,048) (28,363)
Payment of lease liabilities (3,470) (4,787)
Net cash generated from financing activities 12,160 6,631
Net decrease in cash and cash equivalents (910) (5,409)
Cash and cash equivalents at 1 January 5,617 11,620
Exchange losses on cash and cash equivalents (47) (594)
Cash and cash equivalents at 31 December 4,660 5,617
*Acquisition of subsidiary, net of cash received relates to deferred
consideration paid in respect of the Group's acquisition of Compound
Semiconductor Centre Limited in 2023.
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. Material 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 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 Group has continued to experience weaker customer demand and lower
customer orders than originally anticipated following the global semiconductor
industry downturn as market recovery has been slower than expected in key
sectors, driven primarily by the uncertainty in consumer demand in end
markets.
The continuation of weaker customer demand than anticipated, resulting in
sales that have remained broadly flat year-on-year, has presented a
significant challenge to the business which, as previously announced, led the
Directors to commence a Strategic Review of the Group and to take immediate
actions to raise the necessary short-term finance to strengthen the Group's
liquidity position.
The actions taken by the Directors, and previously announced, include:
· 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
· The formal waiver, obtained pre-year end, from HSBC Bank
plc of the Group's 31 December 2024 leverage and interest cover covenant
tests applicable to the Group's £28,000,000 ($35,000,000) multi-currency
revolving credit facility ('RCF')
· The successful £18,000,000 convertible loan note ('CLN')
fund raise completed on 13 March 2025 to provide the Group with additional
short-term liquidity whilst the Board completes its Strategic Review. The CLN
has an initial term of 12 months, the Group has an option to extend for a
further six months, bringing the term to 13 September 2026
· The successful negotiation of a Deed of Amendment and
Restatement with HSBC Bank plc to the Group's £28,000,000 ($35,000,000) RCF
on 10 March 2025 that replaces the leverage and interest cover financial
covenants with minimum EBITDA and minimum liquidity financial covenants for
the remaining tenor of the facility to 1 May 2026
We are also pleased that as of 12 May 2025, the Group has received a
four-month extension of its RCF to 1 September 2026 from HSBC, a reflection of
the longstanding and supportive relationship with the lender.
In the twelve months to 31 December 2024, reported revenue has remained
subdued at £118,034,000 and the Group made a loss after tax for the year of
£38,178,000. The liquidity impact of the loss, combined with capital and
technology development expenditure, property lease payments and debt service
costs has resulted in an increase in the Group's adjusted net debt position
(net debt excluding lease liabilities and fair value gains/losses on
derivative instruments) to £18,800,000 (2023: £2,228,000). At 31 December
2024, the Group had undrawn committed funding of £4,400,000 ($5,500,000)
available under the terms of its multi-currency revolving credit facility.
In assessing the going concern basis of preparation, the Directors have
considered the period to 30 September 2026 ('the going concern assessment
period') to align with the expiry of the extended RCF and extended term date
of the CLN.
The Directors have prepared financial projections containing both a 'base
case' and a 'severe but plausible downside case'.
Base Case
The base case is derived from Group's Board-approved 2025 budget, latest
H12026 forecast and run rate to 30 September 2026, updated for actual results
to 31 March 2025. The base case incorporates a modest expected improvement in
market dynamics and the impact of cost cutting actions already implemented by
the Board.
The base case was prepared with the following key assumptions:
· Revenue for 2025 is forecast to return to modest
mid-single digit percentage year-on-year growth with sequential mid-single
digit percentage half-on-half growth forecast in H12026
· GBP to USD FX rate of 1.32 adopted for the forecast cash
flows throughout the going concern period
· Direct wafer product margins for 2025 and H12026 reflect
operating efficiency improvements linked to a combination of restructuring
actions that have been implemented in 2024 and increased capacity utilisation
· Labour inflation in 2025 and H12026 in line with labour
market norms and non-labour cost inflation in 2025 and H12026 in line with the
current inflationary environment
· Low double digit £'m of capital expenditure in 2025
which includes investment in committed Gallium Nitride (GaN) related
manufacturing capacity, enabling diversification into the high-growth power
electronics and advanced display (uLED) markets and low single digit £'m of
capital expenditure in H12026 related to operational sustainability and
maintenance capital expenditure
Severe but plausible downside
The severe but plausible downside case was prepared by applying the following
downsides and mitigating actions:
· Revenue is assumed 7% down on the base case for 2025 and
20% down for H12026 reflecting a broadly flat year on-year outlook resulting
from a combination of continued weakness in customer demand, further delays in
market recovery and the impact of greater forecasting uncertainty the further
out into the future
· In line with the revenue reduction in both years, there
is a reflective reduction in variable operating costs for 2025 and H12026
· The application of mitigations in the form of reductions
in certain non-manufacturing related discretionary expenditure and deferred
investment in technology asset development over and above those reflected in
the base case. These cost savings and cash management actions have already
been identified, are in the control of management and can be swiftly
implemented
In both the base and severe but plausible downside case, the Group is forecast
to maintain liquidity headroom and to comply with its minimum EBITDA and
minimum liquidity covenants up to the date of expiry of the RCF on 1 September
2026 or redemption of the CLN on 13 September 2026.
The Directors, as part of the announced Strategic Review, plan to raise cash
from the divestment of Group assets to ensure that the Group has a strong
capital position to further invest in its core operations and to enable the
Group to refinance or repay its loan facilities. In the first instance, this
plan includes divestment options for an IPO or full sale of the Group's Taiwan
operations and a comprehensive Strategic Review of all other Group assets and
operations.
Whilst the Directors are confident that the divestment of IQE Taiwan is
progressing as planned and will realise sufficient cash, they acknowledge that
a delayed outcome of the potential sale or IPO of the non-core asset could
impact the availability of sufficient funding for the Group's needs beyond the
maturity of its existing facilities.
The Directors have concluded that the successful completion of the planned
sale of non-core assets and/or availability of sufficient, appropriate funding
for the group's needs beyond the maturity of existing facilities represents a
material uncertainty related to events or conditions that may cast significant
doubt on the group's and the company's ability to continue as a going concern
and, therefore, that the group and company may be unable to realise their
assets and discharge their liabilities in the normal course of business. The
financial statements do not include any adjustments that would result from the
basis of preparation being inappropriate.
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 2024:
• Amendment 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. The amendment also requires
disclosure of information relating to the risks associated with non-current
liabilities that are subject to future covenants that the liability could
become repayable within 12 months.
• Amendment to IAS 7 'Statement of Cash Flows' and IFRS 7 'Financial
Instruments: Disclosures' related to the disclosure and transparency of
supplier finance arrangements.
• Amendment to IAS 12 'Income taxes' which provides temporary mandatory
relief from deferred tax accounting for top up tax and disclosure of new
information to compensate for the potential loss of information arising from
the mandatory relief.
• Amendment to IFRS 16 'Leases' which confirms the initial and subsequent
recognition principles for variable lease payments as a liability in a sale
and leaseback transaction.
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
2025 and have not been applied in preparing these consolidated financial
statements:
• Annual Improvements to IFRS Accounting Standards-Volume 11 which contains
various improvement and enhancements to existing standards
• IFRS S1 'General Requirements for Disclosure of Sustainability related
Financial Information' and IFRS S2 'Climate related Disclosures'
• IFRS 18 'Presentation and disclosure in financial statements' which
includes new requirements for presentation and disclosure with a focus on the
income statement
• IFRS 19 'Subsidiaries without public accountability: disclosures' is a
voluntary standard that contains a reduced disclosure framework for use by
eligible subsidiaries that prepare financial statements applying IFRS
Accounting Standards.
• Amendment to IAS 21 'The Effects of Changes in Foreign Exchange Rates'
which establishes how a spot exchange rate is estimated when a currency lacks
exchangeability.
• Amendments to the Classification and Measurement of Financial Instruments
(Amendments to IFRS 9 and IFRS 7) which provides further clarification and
requirements for the recognition and derecognition criteria for financial
assets and liabilities, the classification requirements for financial assets
and disclosure requirements related to the amendments to the classification
requirements.
• Amendments to contracts referencing nature-dependent Electricity
(Amendments to IFRS 9 and IFRS 7) for power purchase agreements
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
('ELT'). The ELT, prior to the departure of the Chief Executive Officer on 29
October 2024 consisted of the Chief Executive Officer, Chief Financial
Officer, Chief Technology Officer, Chief People Officer, Executive VP Global
Business Development, SVP of Communications Infrastructure and Security
Business Unit, VP US Sales, Director of Corporate Marketing, VP US EPI
Operations and Substrates, VP Asia and Europe EPI Operations, VP Government
Affairs, Chief of Staff and the Executive VP General Counsel & Company
Secretary. Subsequent to the departure of the Chief Executive Officer, the ELT
has been restructured and from November 2024 the ELT consists of the Interim
Chief Executive Officer and Chief Financial Officer, Chief Technology and
Operating Officer, Chief Revenue Officer and the Executive VP General Counsel,
Company Secretary and Chief People Officer. The Executive Leadership Team
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.
• CMOS++ - 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. Starting in 2025, the Group will no longer report
CMOSS++ revenue as a standalone segment reflecting the strategic rebalancing
of the business' product portfolio and a shift in focus towards
diversification into GaN Power and MicroLED.
The ELT primarily use revenue and a measure of adjusted EBITDA to assess the
performance of the operating segments. Measures of total assets and
liabilities for each reportable segment are not reported to the ELT and
therefore have not been disclosed.
3.2 Adjusted EBITDA Loss
Adjusted EBITDA 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 and CFO
recruitment costs, CEO severance costs and impairments where the impairment is
the result of an isolated, non-recurring event. Adjusted EBITDA 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 2024 2023
£'000 £'000
Wireless 67,295 53,877
Photonics 49,876 59,098
CMOS++ 863 2,277
Revenue 118,034 115,252
Adjusted EBITDA
Wireless 16,205 12,347
Photonics 5,840 6,189
CMOS++ (1,517) (1,919)
Central corporate costs (12,416) (12,304)
Adjusted EBITDA 8,112 4,313
Depreciation (20,343) (16,976)
Amortisation (6,390) (7,688)
Gain on remeasurement 202 -
Profit on disposal of PPE 62 152
Adjusted operating loss (18,357) (20,199)
Adjusted items (see note 4)
Wireless (7,441) (1,004)
Photonics (5,974) (2,445)
CMOS++ (669) (45)
Central corporate costs (517) (2,086)
Operating loss (32,958) (25,779)
Finance costs (3,947) (3,032)
Loss before tax (36,905) (28,811)
Adjusted items include £8,418,000 (2023: £nil) of non-cash impairment
charges of which £5,159,000 (2023: £nil) relates to the wireless segment and
£3,259,000 (2023: £nil) relates to the photonics segment.
4. Adjusted performance measures ('APM')
The Directors assess the operating performance of the Group based on both
statutory and adjusted measures. Adjusted measures include adjusted earnings
before interest, tax, depreciation, amortisation, impairment and profit/loss
on disposal of PPE and intangibles (AEBITDA), AEBITDA margin, adjusted
operating loss, adjusted loss before income tax and adjusted losses per share.
These measures are collectively described as Adjusted Performance Measures
(APMs) in this Annual Report. The Directors believe that APMs provide a useful
comparison of business trends and performance and allow management and other
stakeholders to better compare the performance of the Group between periods,
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 APMs for internal planning, budgeting,
reporting and assessment of the performance of the business. The term adjusted
is not defined under IFRS and therefore the APMs may not be directly
comparable with similarly titled measures used by other companies.
Adjusted profit measures
The following table summarises the statutory and adjusted profit and loss
account measures for the year together with the adjustments made to each line
item.
Adjusted Adjusted 2024 Adjusted Adjusted 2023
Results Items Reported Results Items Reported
£'000 £'000 Results £'000 £'000 Results
£'000 £'000
Revenue 118,034 - 118,034 115,252 - 115,252
Cost of sales (112,543) (1,045) (113,588) (111,244) (1,680) (112,924)
Gross profit/(loss) 5,491 (1,045) 4,446 4,008 (1,680) 2,328
SG&A (24,109) (5,873) (29,982) (26,167) (6,319) (32,486)
Impairment of intangibles - (3,772) (3,772) - - -
Impairment of PPE - (4,615) (4,615) - - -
Impairment of right-of-use assets - (31) (31) - - -
Gain on remeasurement of right-of-use asset 202 - 202 - - -
Impairment (loss)/reversal on receivables (3) - (3) 1,808 - 1,808
Gains on acquisitions - - - - 2,419 2,419
Profit on disposal of PPE 62 735 797 152 - 152
EBITDA 8,112 (6,918) 1,194 4,313 (5,580) 1,267
Depreciation (20,343) - (20,343) (16,976) - (16,976)
Amortisation (6,390) - (6,390) (7,688) - (7,688)
Impairment of intangibles - (3,772) (3,772) - - -
Impairment of PPE - (4,615) (4,615) - - -
Impairment of right-of-use assets - (31) (31) - - -
Gain on remeasurement of right-of-use asset 202 - 202 - - -
Profit on disposal of PPE 62 735 797 152 - 152
Operating loss (18,357) (14,601) (32,958) (20,199) (5,580) (25,779)
Finance costs (3,947) - (3,947) (3,032) - (3,032)
Loss before tax (22,304) (14,601) (36,905) (23,231) (5,580) (28,811)
Taxation (1,430) 157 (1,273) (759) 192 (567)
Loss for the period (23,734) (14,444) (38,178) (23,990) (5,388) (29,378)
Loss per share attributable to owners of the parent company during the year
Basic loss per share (2.46p) 1.50p (3.96p) (2.68p) 0.60p (3.28p)
Diluted loss per share (2.46p) 1.50p (3.96p) (2.68p) 0.60p (3.28p)
Adjustments to operating profit
2024 Cost of sales £'000 SG&A Impairments Profit on disposal 2024 Tax 2024
£'000 £'000 £'000 Adjusted Impact Adjusted
Pre-Tax £'000 Items
Items £'000
£'000
Share-based payments (1,045) (1,929) - - (2,974) 157 (2,817)
Share-based payments - CEO recruitment - (77) - - - (77)
(77)
Share-based payments - CFO recruitment - (123) - - - (123)
(123)
CEO recruitment - (307) - - (307) - (307)
CEO severance - (416) - - (416) - (416)
Wireless CGU impairment - - (3,066) - (3,066) - (3,066)
Restructuring - (3,021) (5,352) 735 (7,638) - (7,638)
Total (1,045) (5,873) (8,418) 735 (14,601) 157 (14,444)
2023 Cost of sales £'000 SG&A Other 2023 Tax 2023
£'000 Gains Adjusted Impact Adjusted
£'000 Pre-Tax £'000 Items
Items £'000
£'000
Share-based payments (1,680) (840) - (2,520) 192 (2,328)
Share-based payments - CEO recruitment - (45) - - (45)
(45)
CEO recruitment - (300) - (300) - (300)
CFO severance & recruitment - (454) - (454) - (454)
Restructuring - (4,680) - (4,680) - (4,680)
Gain on deemed disposal of JV - - 2,419 2,419 - 2,419
Total (1,680) (6,319) 2,419 (5,580) 192 (5,388)
The nature of the adjusted items is as follows:
Share-based payments
The £2,974,000 (2023: 2,520,000) charge relates to share-based payments
recorded in accordance with IFRS 2 'Share-based payment'. Share-based payments
which arise each financial year are classified as an APM due to the non-cash
charge being partially outside of the Group's control as it is based on
factors such as share price volatility and interest rates which may be
unrelated to the performance of the Group during the period in which the
expense occurred.
Chief Executive Officer recruitment
The charge of £77,000 (2023: £45,000) relates to the share-based payment
charge for new starter awards granted to the former CEO upon recruitment. The
charge of £307,000 (2023: £300,000) relates to costs associated with the
cash element of the new starter award granted to the former CEO upon
recruitment.
Chief Financial Officer recruitment
The charge of £123,000 (2023: £nil) relates to the share-based payment
charge for new starter awards granted to the CFO. Chief Financial Officer
severance and recruitment costs of £454,000 in 2023 related to settlement and
legal costs in relation to the former Chief Financial Officer and recruitment
costs in relation to the newly appointed Chief Financial Officer.
Chief Executive Officer Severance
The charge of £416,000 (2023: £nil) relates to costs, primarily related to
payments in lieu of notice, associated with the termination of the former
CEO's employment.
Wireless CGU impairment
An impairment was identified in the year relating to the Wireless CGU
determined based on value in use calculations. The non-cash impairment loss of
£3,066,000 relates to the Group's US related wireless assets and has been
allocated to the relevant US based intangible and tangible assets which has
resulted in a non-cash intangible asset impairment charge of £885,000 and a
non-cash property, plant and equipment impairment charge of £2,181,000.
Restructuring
The charge of £7,638,000 (2023: £4,680,000) relates to the consolidation of
the Group's US, UK and Asian manufacturing operations and the restructuring of
the Group's Executive Leadership Team.
Group Restructuring
· Group restructuring charges of £266,000 (2023: £nil) consist of
employee-related costs of £266,000 (2023: £nil) related to the restructuring
of the Group's Executive Leadership Team following the departure of the former
CEO. Group restructuring charges of £1,290,000 in 2023 related to employee
costs and redundancies associated with a group-wide restructuring programme.
US Restructuring
· US restructuring charges of £763,000 (2023: £3,390,000)
relating to the closure of the Group's manufacturing facility in Pennsylvania
consist of employee-related costs of £261,000 (2023: £1,789,000), site
decommissioning costs of £1,014,000 (2023: £1,601,000), non-cash property,
plant and equipment asset impairments of £89,000 (2023: £nil) and profit on
disposal of property, plant and equipment of £632,000 (2023: £nil). As at 31
December 2024, cumulative restructuring charges of £6,164,000 (2023:
£5,346,000) have been incurred. No further restructuring charges associated
with the closure of the site are expected in 2025.
· US restructuring charges of £4,889,000 (2023: £nil) relating to
the strategic re-positioning of the Group's Massachusetts and North Carolina
manufacturing sites consist of non-cash property, plant and equipment asset
impairments of £2,002,000 (2023: £nil) and non-cash intangible development
cost impairments of £2,887,000 (2023: £nil).
UK Restructuring
· UK restructuring charges of £1,584,000 (2023: £nil) relating to
the consolidation of the Group's South Wales activities into its Newport
manufacturing site consist of employee-related costs of £447,000 (2023:
£nil), site decommissioning costs of £897,000 (2023: £nil), non-cash
property, plant and equipment asset impairments of £343,000 (2023: £nil) and
profit on disposal of PPE of £103,000 (2023: £nil).
Asian Restructuring
· Taiwanese restructuring charges of £155,000 (2023: £nil)
consist of legal and professional fees relating to the dual track IPO or sale
of the Group's Taiwanese manufacturing operations.
· Singapore restructuring credit of £19,000 (2023: £nil) relates
to certain final cash receipts linked to the voluntary liquidation of the
Group's Singapore subsidiaries, where manufacturing operations ceased in June
2022.
Gain on deemed disposal of joint venture
Gain on acquisitions of £nil (2023: £2,419,000) relates to the gain
recognised on acquisition of the remaining shares in the Group's joint
venture, CSC, in 2023 increasing its shareholding to 100%.
Cash impact of adjusting items
The cash impact of adjusting items is set out below:
Cash Impact Cash from operations £'000 Investing activities 2024 Total Cash from operations Investing activities 2023 Total
£'000 £'000 £'000 £'000 £'000
Reported cash flows 2,472 (10,194) (7,722) 10,074 - 10,074
Share-based payments - social security 123 - 123 - - -
CEO recruitment - - - 463 - 463
CEO severance 196 - 196 - - -
CFO severance & recruitment - - - 454 - 454
Onerous contract 394 - 394 256 - 256
Restructuring 4,092 (4,828) (736) 4,497 - 4,497
Total adjusted items 4,805 (4,828) (23) 5,670 - 5,670
Adjusted cash flows 7,277 (15,022) (7,745) 15,744 - 15,744
Onerous contract
Onerous contract cash flows reflect royalty payments relating to the Group's
cREO™ technology where development activity ceased in prior periods totals
£394,000 (2023: £256,000).
Restructuring
Cash generated in the year from the restructuring of the Group's Executive
Leadership Team and the consolidation of the Group's US, UK and Asian
manufacturing operations totalled £736,000 (2023: £4,497,000 cash defrayed)
Group Restructuring
· Cash costs defrayed of £64,000 (2023: £nil) consist of
employee-related costs related to the restructuring of the Group's Executive
Leadership Team following the departure of the former CEO. Cash costs of
£1,290,000 in 2023 related to employee costs and redundancies associated with
a group-wide restructuring programme.
US Restructuring
· Cash costs relating to the closure of the Group's manufacturing
facility in Pennsylvania total £6,856,000 (2023: £4,037,000) of which,
£2,820,000 (2023: £3,087,000) has been defrayed in the current period. Cash
proceeds on disposal of PPE is included in investing activities and totals
£4,061,000 (2023: £nil) in the year.
UK Restructuring
· Cash costs relating to the consolidation of the Group's South
Wales activities into its Newport manufacturing site total £1,072,000 (2023:
£nil). Cash proceeds on disposal of property, plant and equipment is included
in investing activities and totals £767,000 (2023: £nil) in the year.
Asian Restructuring
· Cash costs relating to the dual track IPO or sale of the Group's
Taiwanese manufacturing operations total £155,000 (2023: £nil)
· Final cash receipts linked to the voluntary liquidation of the
Group's Singapore subsidiaries, where manufacturing operations ceased in June
2022 total £19,000.
Adjustments to net debt
Adjusted net debt 2024 2023
£'000 £'000
Net debt (69,330) (48,528)
Lease liabilities due after one year 44,872 40,435
Lease liabilities due within one year 5,658 5,865
Adjusted net debt (18,800) (2,228)
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.
2024 2023
£'000 £'000
Loss attributable to ordinary shareholders (38,178) (29,378)
Adjustments to loss after tax (note 4) 14,444 5,388
Adjusted loss attributable to ordinary shareholders (23,734) (23,990)
2024 2023
Number Number
Weighted average number of ordinary shares 964,315,248 896,744,318
Dilutive share options 14,291,760 10,155,464
Adjusted weighted average number of ordinary shares 978,607,008 906,899,782
Adjusted basic loss per share (2.46p) (2.68p)
Basic loss per share (3.96p) (3.28p)
Adjusted diluted loss per share (2.46p) (2.68p)
Diluted loss per share (3.96p) (3.28p)
6. Cash generated from operations
Group 2024 2023
£'000 £'000
Loss before tax (36,905) (28,811)
Finance costs 3,947 3,032
Depreciation of property, plant and equipment 16,552 13,186
Depreciation of right-of-use assets 3,791 3,790
Amortisation of intangible assets 6,390 7,688
Impairment of intangible assets 3,772 -
Impairment of property, plant and equipment 4,615 -
Impairment of right-of-use assets 31 -
Gain on remeasurement of right-of-use assets (202) -
Inventory write downs 391 522
Non-cash movement on trade receivable expected credit losses 3 (1,808)
Non-cash provision movements 288 1,599
Gain on deemed disposal of JV - (2,419)
Profit on disposal of fixed assets (797) (152)
Share-based payments 3,174 2,565
Cash inflow/(outflow) from operations before changes in working capital 5,050 (808)
Decrease in inventories 3,677 7,503
(Increase) /decrease in trade and other receivables (608) 6,601
Decrease in trade and other payables (3,938) (1,760)
Decrease in provisions (2,899) (1,462)
Cash inflow from operations 1,282 10,074
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2024 or 2023. The financial
information for 2023 is derived from the statutory accounts for 2023 which
have been delivered to the registrar of companies. The auditor has reported on
the 2023 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.
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