REG - IQE PLC - IQE plc: H1 2025 Interim Results
Tue 07:00
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RNS Number : 3303A IQE PLC 23 September 2025
IQE plc
Cardiff, UK
23 September 2025
H1 2025 Results
IQE plc (AIM: IQE, "IQE" or the "Group"), the leading global supplier of
compound semiconductor wafer products and advanced material solutions, today
announces its unaudited results for the six months ended 30 June 2025.
H1 2025 Financial Summary:
H1 2025 H1 2024
£'m
£'m
Revenue 45.3 66.0
Adjusted EBITDA(1) (0.4) 6.6
Adjusted loss before tax (12.9) (7.2)
Reported loss before tax (23.5) (12.1)
Adjusted net cashflow from operations 6.2 1.8
Reported net cashflow from operations 3.6 (2.6)
Cash capital expenditure(2) (1.0) (5.0)
Adjusted net debt(3) (23.5) (17.0)
Cash and cash equivalents 17.0 7.8
Reported Diluted EPS (2.69p) (1.57p)
Adjusted Diluted EPS (1.60p) (1.05p)
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 8 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.
H1 2025 Financial Highlights:
· Revenue for H1 2025 decreased at £45.3m (H1 2024: £66.0m).
‒ Wireless revenue of £18.6m (H1 2024: £38.8m) decreased 52%
year-on-year reflecting slow demand due to the overhang of 2024 customer
inventory builds, tariff uncertainty and softness in consumer purchasing of
mobile handsets.
‒ Photonics revenue of £26.6m (H1 2024: £26.8m) was broadly flat
year-on-year reflecting strong performance in InP data communications for AI
markets, partially offsetting funding delays in US military and defence
Infrared markets.
· Adjusted LBITDA of (£0.4m) (H1 2024: £6.6m EBITDA), reflecting low
operating leverage as a result of capacity underutilisation stemming from
lower market demand.
· Reported operating loss of (£23.5m) (H1 2024: (£12.1m)).
· Reported net cashflow from operations of £3.6m (H1 2024: (£2.6m))
significantly increased year-on-year, reflecting careful cash management and a
£4.6m working capital inflow.
· Cash capital expenditure (PP&E) of £1.0m (H1 2024: £5.0m)
reflecting prudent investment into the Group's GaN diversification and
capacity expansion.
· Adjusted net debt of £23.5m (H1 2024: net debt of £17.0m) with an
undrawn balance of $5.5m (£4.0m) on the Group's Revolving Credit Facility as
at 30 June 2025.
· Cash and cash equivalents of £17.0m as at 30 June 2025 following the
£18.0m Convertible Loan Note fundraise in March 2025.
· Cost control and cash generation
‒ Tight controls over discretionary expenditure in line with current
trading environment
‒ Continued reduction in SG&A spend while simultaneously
strengthening operational capabilities
‒ Maintained right-sized headcount following over 10% reduction in
prior year
‒ Asset optimisation including the sale of excess tools resulting
from site consolidation
‒ Share swap in lieu of salary agreed for senior management, taking
effect in H2 2025
· Global site optimisation programme
‒ Cessation of manufacturing operations at Silicon site in South
Wales in Q1 2025 with exit from the site anticipated in Q4 2025
Business update:
· Connect
Strength in InP reflects proliferation of AI and demands for greater
connectivity, speed and functionality.
‒ Secured multiple Tier 1 customer design wins for laser and
detector products enabling next-generation AI and hyperscale data centre
infrastructure, while simultaneously launching 6-inch foundry platform to
serve future demand for Silicon Photonics
‒ New platform adoption of GaN RF radar solutions in satellite
communications and military and defence sectors, strengthening IQE's position
in mission-critical markets and supporting the build out of satellite internet
constellations
‒ Integration of higher-performance HBTs in leading smartphones,
delivering enhanced AI capabilities and battery performance
‒ Customer partnership to develop microLEDs enabling high density,
power efficient datacom interconnects
· Sense
Continued demand for sensing products in consumer mobile markets with
expansion of Infrared products across critical defence platforms.
‒ Advanced stage customer qualification for higher-performance
VCSELs powering the next-generation of 3D Sensing in future generations of
smartphones
‒ Diversification of 3D Sensing product portfolio with
multi-junction VCSELs, enabling precision gesture recognition for AR/VR
applications
‒ Expansion of Infrared customer portfolio with next-generation
long-wavelength solutions (LWIR) for autonomous sensing platforms
‒ Delivery of first commercial orders for 6-inch GaSb epiwafers
enabling large area sensor products for advanced imaging for space and
satellite applications
· Power
Strong development pipeline despite slower adoption of electric vehicle
technology.
‒ Progression of Joint Development Agreement with X-FAB, sampling
underway with leading automotive Power customers
‒ Continued development of GaN on Si technology to create sovereign
supply chains for both US and European markets, leveraging IQE's longstanding
expertise in RF applications
‒ Development of higher-voltage GaN (>1000 V) through
government-funded programs for vertical GaN and GaN on sapphire, targeting
automotive and radar markets
· Display
Continuation of development partnership with consumer multinational in new
display ecosystems targeting next-generation devices.
‒ Expansion of GaN reactor capacity to support 8-inch GaN on Si
development by consumer OEMs to enable cutting edge AR/VR displays
‒ Delivering 8-inch RGB (red, green, blue) epitaxy for silicon
integration, enabling high volume, cost-effective advanced microLED
technologies
Strategic Review:
On 8 September, IQE announced the expansion of its ongoing Strategic Review to
incorporate the potential sale of the Company and confirmed that it was
already in receipt of an approach from a potential offeror. Additional
early-stage expressions of interest have been received following the
announcement. There can be no certainty either that an offer will be made nor
as to the terms of any offer, if made.
In addition, IQE continues to advance discussions relating to the sale of the
Group's operations in Taiwan. Should the sale of Taiwan be concluded, it is
expected that the proceeds from such sale will be used to fully repay the
Group's Revolving Credit Facility with HSBC Bank and the Convertible Loan
Notes issued in March 2025, as well as providing IQE with cash to invest in
its core operations.
The Board continues to be advised by Lazard on the full scope of the Strategic
Review.
Current trading and outlook:
Uncertain macroeconomic conditions impacted trading in H1 2025, resulting in
some end customer demand being fulfilled with their existing inventory. During
this period, Wireless markets were affected by softness in mobile handset
sales, and this is expected to persist through 2025. Additionally, delays to
federal funding cycles in US military and defence sectors are resulting in the
deferral of orders into 2026.
As previously announced, revenue for FY 2025 is expected to be between £90.0m
to £100.0m, resulting in an adjusted EBITDA position of between £(5.0m) to
£2.0m (the "IQE Profit Forecast"). Efficiency initiatives focused on cost
structure and capacity utilisation are ongoing, with the aim of strengthening
margins and cash generation.
The IQE Profit Forecast constitutes an ordinary course profit forecast for the
purposes of Note 2(a) on Rule 28.1 of the Code. Accordingly, the appendix to
this announcement contains the IQE directors' confirmations required pursuant
to Rule 28.1(c) of the Code.
The Group's banking facilities provided by HSBC Bank plc are subject to
certain covenant tests. IQE has received a waiver from HSBC in relation to Q3
2025 EBITDA covenant testing. This is a reflection of the longstanding and
supportive relationship with the lender. IQE is also engaged with stakeholders
to improve both the Group's near-term liquidity position and working capital
cycle.
IQE's robust and ever-growing customer pipeline, featuring Tier 1 consumer
brands, underscores ongoing market demand for the Company's products, with
market conditions anticipated to improve in 2026 as existing inventory levels
start to normalise. IQE is seeing strong organic growth in multiple areas,
including VCSELs for next-generation smartphones, InP products for data centre
and optical communication markets, microLED for AR/VR and GaN RF products.
Jutta Meier, Chief Executive Officer of IQE, commented:
"Our first half performance fell short of expectations, driven by a
combination of market headwinds and the unwinding of customer inventory.
Despite this, I remain encouraged by the progress we have made and our
continued investment in innovation is yielding promising results. We have made
significant development progress in areas that are critical to our long-term
strategy, such as in GaN and microLED, and are poised to capitalise on the
opportunities in these growing markets.
Looking ahead, our operational discipline supports IQE's long-term vision
centred on sustainable growth. This is underscored by our continued strong
customer pipeline, which reinforces my confidence in our diversification
strategy. Additionally, I am pleased to see the increasing level of interest
in our Strategic Review, and I look forward to updating the market on the
progress we are making in due course."
Results Presentation:
IQE will present its H1 2025 Results via webcast at 8:30am BST today, 23
September 2025. If you would like to view this webcast, please register by
using the below link and following the instructions:
https://brrmedia.news/IQE_HY25 (https://brrmedia.news/IQE_HY25)
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.
Appendix
Directors' confirmation
The directors of IQE confirm that, as at the date of this announcement, the
IQE Profit Forecast remains valid and that it has been properly compiled on
the basis of the assumptions set out below and that the basis of accounting
used is consistent with IQE's existing accounting policies.
Basis of preparation
The IQE Profit Forecast is based on IQE's current internal unaudited
consolidated accounts for the 7-month period ended 31 July 2025 and IQE's
current internal unaudited forecasts for the remainder of the financial year
ending 31 December 2025. The IQE Profit Forecast has been compiled on the
basis of the assumptions set out below.
The basis of the accounting policies used in the IQE Profit Forecast is
consistent with the existing accounting policies of the IQE group.
Assumptions
The IQE Profit Forecast has been prepared on the basis referred to above and
subject to the principal assumptions set out below. The IQE Profit Forecast is
inherently uncertain and there can be no guarantee that any of the assumptions
listed below will occur and/or if they do, their effect on IQE's results of
operations, financial condition or financial performance may be material. The
IQE Profit Forecast should be read in this context and construed accordingly.
The directors of IQE have made the following assumptions in respect of the
financial year ending 31 December 2025:
Assumptions within IQE's control or influence:
(a) no material change to the existing strategy or operation of IQE's
business, including the business or operating model;
(b) no material adverse change to IQE's ability to meet customer, supplier
and partner needs and expectations based on current practice;
(c) no material unplanned asset disposals, merger and acquisition or
divestment activity conducted by or affecting the IQE group;
(d) no material change to the present management of the IQE group; and
(e) no material change in capital allocation policies of the IQE group.
Assumptions outside of IQE's control or influence
(a) no material effect from changes to existing prevailing macroeconomic,
fiscal / inflationary conditions in the markets or regions in which the IQE
group operates;
(b) no material adverse change to IQE's market environment, including in
relation to consumer demand or competitive environment;
(c) no material adverse events that have a significant impact on IQE's major
partners or suppliers;
(d) no material changes of the value of pound sterling above the average
foreign exchange rates that have applied during the 7-month period ended 31
July 2025;
(e) no material adverse events that would have a significant impact on the
IQE group, including (but not limited to) information technology/cyber
infrastructure;
(f) no material new litigation or regulatory investigations, and no material
unexpected developments in any existing litigation or regulatory
investigation, each in relation to any of IQE's operations, products or
services; and
(g) no material change in legislation, taxation or regulatory requirements
impacting IQE's operations, expenditure or its accounting policies.
Financial Review
Consolidated Income Statement
6 months to 6 months to 12 months to
30 Jun 2025 30 Jun 2024 31 Dec 2024
(All figures £'000s) Note Unaudited Unaudited Audited
Revenue 7 45,254 66,018 118,034
Cost of sales (44,723) (61,026) (113,588)
Gross profit 531 4,992 4,446
Selling, general and administrative expenses (16,305) (16,211) (29,982)
Impairment loss on intangible assets (6,968) - (3,772)
Impairment loss on property, plant and equipment (401) (90) (4,615)
Impairment loss on right of use asset (245) - (31)
Impairment loss on trade receivables and contract assets (65) (31) (3)
(Loss)/profit on disposal of intangible assets and property, plant and - (1,094) 797
equipment
Gains on remeasurement of right of use asset - 296 202
Operating loss 7 (23,453) (12,138) (32,958)
Finance income 117 - -
Finance costs (3,163) (1,765) (3,947)
Adjusted loss before income tax (15,994) (8,972) (22,304)
Adjustments 8 (10,505) (4,931) (14,601)
Loss before income tax 7 (26,499) (13,903) (36,905)
Taxation 462 (1,168) (1,273)
Loss for the period (26,037) (15,071) (38,178)
Loss attributable to:
Equity shareholders (26,037) (15,071) (38,178)
(26,037) (15,071) (38,178)
Loss per share attributable to owners of the parent during the period
Basic loss per (2.69p) (1.57p) (3.96p)
share
10
Diluted loss per (2.69p) (1.57p) (3.96p)
share
10
Adjusted basic and diluted earnings per share are presented in Note 10.
All items included in the loss for the period relate to continuing operations.
Consolidated statement of comprehensive income
6 months to 6 months to 12 months to
30 Jun 2025 30 Jun 2024 31 Dec 2024
(All figures £'000s) Unaudited Unaudited Audited
Loss for the period (26,037) (15,071) (38,178)
Exchange differences on translation of foreign operations* (3,710) (1,181) (826)
Total comprehensive expense for the period (29,747) (16,252) (39,004)
Total comprehensive expense attributable to:
Equity shareholders (29,747) (16,252) (39,004)
(29,747) (16,252) (39,004)
* Balance might subsequently be reclassified to the income statement when
it becomes realised.
Consolidated Balance Sheet
As At As At As At
30 Jun 2025 30 Jun 2024 31 Dec 2024
(All figures £'000s) Note Unaudited Unaudited Audited
Non-current assets
Intangible assets 19,842 34,275 28,950
Property, plant and equipment 103,397 124,716 113,674
Right of use assets 39,382 45,684 42,210
Total non-current assets 162,621 204,675 184,834
Current assets
Inventories 19,435 24,618 20,009
Trade and other receivables 29,214 46,849 37,424
Cash and cash equivalents 12 16,990 7,810 4,660
Assets held for resale - 2,304 120
Total current assets 65,639 81,581 62,213
Total assets 228,260 286,256 247,047
Current liabilities
Trade and other payables (32,290) (48,794) (34,405)
Current tax liabilities - (586) (428)
Bank borrowings 12 - (1,569) -
Convertible loan notes 12 (18,243) - -
Lease liabilities 12 (4,541) (7,329) (5,658)
Provisions for other liabilities and charges (938) (1,225) (774)
Total current liabilities (56,012) (59,503) (41,265)
Non-current liabilities
Trade and other payables (1,911) (2,148) (2,035)
Bank borrowings 12 (22,285) (23,220) (23,460)
Lease liabilities 12 (41,756) (44,493) (44,872)
Provisions for other liabilities and charges (235) (504) (774)
Deferred tax liabilities - (710) (531)
Total non-current liabilities (66,187) (71,075) (71,672)
Total liabilities (122,199) (130,578) (112,937)
Net assets 106,061 155,678 134,110
Equity attributable to shareholders of the parent
Share capital 14 9,765 9,666 9,672
Share premium 155,972 155,920 155,972
Retained earnings (103,514) (62,537) (85,644)
Exchange rate reserve 19,744 31,266 31,621
Other reserves 24,094 21,363 22,489
Total equity 106,061 155,678 134,110
Consolidated Statement of Changes in Equity
Unaudited Share capital Share premium Retained earnings Exchange rate reserve Other reserves Total equity
(All figures £'000s)
At 1 January 2025 9,672 155,972 (85,644) 31,621 22,489 134,110
Loss for the period - - (26,037) - - (26,037)
Other comprehensive expense for the period - - - (3,710) - (3,710)
Total comprehensive expense - - (26,037) (3,710) - (29,747)
Share based payments - - - - 1,399 1,399
Equity component of convertible loan notes - - - - 206 206
Transfer of exchange rate reserve to retained earnings - - 8,167 (8,167) - -
Proceeds from shares issued (net of expenses) 93 - - - - 93
Total transactions with owners 93 - 8,167 (8,167) 1,605 1,698
At 30 June 2025 9,765 155,972 (103,514) 19,744 24,094 106,061
Unaudited Share capital Share premium Retained earnings Exchange rate reserve Other reserves Total equity
(All figures £'000s)
At 1 January 2024 9,615 155,844 (47,466) 32,447 19,345 169,785
Loss for the period - - (15,071) - - (15,071)
Other comprehensive expense for the period - - - (1,181) - (1,181)
Total comprehensive expense - - (15,071) (1,181) - (16,252)
Share based payments - - - - 2,018 2,018
Proceeds from shares issued 51 76 - - - 127
Total transactions with owners 51 76 - - 2,018 2,145
At 30 June 2024 9,666 155,920 (62,537) 31,266 21,363 155,678
Audited Share capital Share premium Retained earnings Exchange rate reserve Other reserves Total equity
(All figures £'000s)
At 1 January 2024 9,615 155,844 (47,466) 32,447 19,345 169,785
Loss for the year - - (38,178) - - (38,178)
Other comprehensive expense for the year
- - - (826) - (826)
Total comprehensive expense - - (38,178) (826) - (39,004)
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
Consolidated Cash Flow Statement 6 months to 6 months to 12 months to
30 Jun 2025 30 Jun 2024 31 Dec 2024
(All figures £'000s) Note Unaudited Unaudited Audited
Cash flows from operating activities
Adjusted cash inflow from operations 6,190 1,789 6,087
Cash impact of adjustments 8 (2,582) (4,421) (4,805)
Cash generated from operations 11 3,608 (2,632) 1,282
Interest received 117 - -
Interest paid (1,961) (1,410) (3,317)
Income tax paid (560) (701) (841)
Net cash generated/(used) in operating activities 1,204 (4,743) (2,876)
Cash flows from investing activities
Purchase of property, plant and equipment (1,038) (4,959) (11,359)
Purchase of intangible assets (94) (916) (1,609)
Capitalised development expenditure (1,516) (1,405) (1,877)
Proceeds from disposal of property, plant and equipment and intangible assets 116 942 4,906
Acquisition of subsidiary, net of cash received (150) (128) (255)
Adjusted cash used in investing activities (2,682) (7,317) (15,022)
Cash impact of adjustments - proceeds from disposal of property, plant and 8 - 851 4,828
equipment and intangible assets
Net cash used in investing activities (2,682) (6,466) (10,194)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 93 127 185
Proceeds from issuance of convertible loan notes 18,000 - -
Expenses associated with issuance of convertible loan notes (715) - -
Proceeds from bank borrowings - 19,493 19,493
Repayment of bank borrowings - (2,532) (4,048)
Payment of lease liabilities (3,419) (3,613) (3,470)
Net cash generated from financing activities 13,959 13,475 12,160
Net increase / (decrease) in cash and cash equivalents 12,481 2,266 (910)
Cash and cash equivalents at the beginning of the period 4,660 5,617 5,617
Exchange losses on cash and cash equivalents (151) (73) (47)
Cash and cash equivalents at the end of the period 12 16,990 7,810 4,660
1. REPORTING ENTITY
IQE plc is a public limited company incorporated in the United Kingdom under
the Companies Act 2006. The Company is domiciled in the United Kingdom and is
quoted on the Alternative Investment Market (AIM).
These condensed consolidated interim financial statements ('interim financial
statements') as at and for the six months ended 30 June 2025 comprise the
Company and its Subsidiaries (together referred to as 'the Group'). The
principal activities of the Group are the development, manufacture and sale of
advanced semiconductor materials.
2. BASIS OF PREPARATION
These interim financial statements have been prepared in accordance with IAS
34 'Interim Financial Reporting'
and should be read in conjunction with the Group's last annual consolidated
financial statements as at and for the year ended 31 December 2024 which were
approved by the Board of Directors on 12 May 2025 and have been delivered to
the Registrar of Companies. The report of the auditors on those financial
statements was unqualified, did not contain any statement under section 498 of
the Companies Act 2006 but did contain a material uncertainty related to going
concern.
The interim financial statements do not include all of the information
required for a complete set of IFRS financial statements and do not constitute
statutory accounts within the meaning of section 434 of the Companies Act
2006. However, selected explanatory notes are included to explain events and
transactions that are significant to an understanding of the changes in the
Group's financial position and performance since the last annual financial
statements.
Comparative information in the interim financial statements as at and for the
year ended 31 December 2024 has been taken from the published audited
financial statements as at and for the year ended 31 December 2024. All other
periods presented are unaudited.
The Board of Directors and the Audit Committee approved the interim financial
statements on 22 September 2025.
3. GOING CONCERN
The Group has experienced weak customer demand and low customer orders
following the global semiconductor industry downturn as recovery has been
slower than anticipated in key sectors, driven primarily by geo-politics and
low consumer demand in certain end markets. The continuation of weak customer
demand, resulting in a 31% reduction in H1 2025 revenue has presented a
significant challenge to the business which, as previously announced, led the
Directors to commence an on-going 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 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 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 on-going 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
· The successful negotiation of an extension of the RCF with HSBC
Bank plc on 12 May 2025 to extend the tenor of the RCF to 1 September 2026
· Formal waiver of the Group's 30 September 2025 minimum EBITDA
financial covenant test by HSBC Bank plc
In the six months to 30 June 2025, reported revenue has declined 31% to
£45,254,000 and the Group made a loss after tax for the period of
£26,037,000. The short term liquidity impact of the loss, combined with
capital and technology development expenditure, property lease payments and
debt service costs has been mitigated by the successful £18,000,000
convertible loan note fund raise which has resulted in an increase in the
Group's cash position to £16,990,000 (H1 2024: £7,810,000, 2024:
£4,660,000) despite an increase in the adjusted net debt position (net debt
excluding lease liabilities and fair value gains/losses on derivative
instruments) to £23,538,000 (H1 2024: £16,979,000, 2024: £18,800,000). At
30 June 2025, the Group had undrawn committed funding of £3,960,000
($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 31 December 2026 ('the going concern assessment
period') to include 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 latest Board approved H2 2025 and 2026
forecasts. The base case incorporates an expected improvement in market
dynamics in 2026 and the impact of cost cutting actions already implemented by
the Board.
The base case was prepared with the following key assumptions:
· Revenue for H2 2025 is aligned with the lower end of the Group's
latest trading update with year-on-year growth of 31% forecast in 2026 as
customer and market dynamics are expected to improve with revenue forecast to
return to 2024 levels.
· GBP to USD FX rate of 1.36 adopted for the forecast cash flows
throughout the going concern period
· Direct wafer product margins in 2026 reflect improved asset
utilisation broadly aligned with historical norms
· Labour headcount increases of ~5% forecast in H2 2025 with labour
inflation in line with labour market norms
· Non-labour cost inflation in H2 2025 and 2026 in line with the
current 3% inflationary environment
· Mid-single-digit £'m of capital expenditure in H2 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 2026 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:
· Revenue is assumed 8% down on the base case for Q4 2025 and Q1
2026, 22% down for Q2 and Q3 2026 and 24% down for Q4 2026 to reflect a
combination of continued weakness in customer demand, further delays in market
recovery and the impact of greater forecasting uncertainty the further into
the future the forecasts extend. 2025 revenue is forecast at the bottom end of
the Group's latest trading update with 2026 revenue forecast at a level
similar to the mid-point of the 2025 range.
· In line with the revenue reduction in both years, there is a
reflective reduction in variable operating costs for Q4 2025 and 2026
The Directors remain in discussion with the Group's bankers, HSBC Bank plc, to
secure the banks continuing support for the Group and have obtained formal
waiver of the 30 September 2025 minimum EBITDA financial covenant test, during
a period when the Group's Strategic Review remains on-going.
In both the base and severe but plausible downside case, the Group is forecast
to breach its minimum EBITDA covenant from 31 December 2025 and minimum
liquidity covenant in H1 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 and liquidity position to further invest in its core operations and to
enable the Group to refinance or repay its CLNs and RCF loan facility. In the
first instance, this plan includes divestment options for a full sale of
either the whole Group or 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 either the whole
Group or IQE Taiwan is progressing as planned and will realise sufficient
cash, they acknowledge that either a decision by HSBC Bank plc to withdraw its
on-going support of the Group, or a delayed outcome of the potential sale of
the whole Group or IQE Taiwan could impact the availability of sufficient
funding for the Group's needs in the going concern period from 31 December
2025 onwards.
The Directors have concluded that securing the on-going support of HSBC Bank
plc, combined with the successful completion of the planned sale of the whole
Group or IQE Taiwan and/or availability of sufficient, appropriate funding for
the group's needs beyond 31 December 2025 represent material uncertainties
related to events or conditions 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 interim financial statements do not include any
adjustments that would result from the basis of preparation being
inappropriate.
4. USE OF JUDGEMENTS AND ESTIMATES
In preparing these interim financial statements, management has made
judgements and estimates that affect the application of accounting policies
and the reported amounts of assets, liabilities, income and expense. Actual
results may differ from these estimates.
The significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty were the
same as those described in the last annual financial statements except as
follows:
Impairment of Cash Generating Units ('CGU')
At the end of each reporting period, the Group assesses whether there is any
indication of impairment of non-current assets allocated to the Group's CGU's.
Multiple production facilities and production assets are included in a single
CGU reflecting that production can (and is) transferred between sites and
production assets for different operating segments to suit capacity planning
and operational efficiency. Given the interdependency of facilities and
production assets non-current assets are tested for impairment by grouping
operational sites and production assets into CGUs based on type of production.
In the six months to 30 June 2025, the Group has experienced weak customer
demand and a low volume of customer orders which has contributed to operating
losses in each of the Group's Wireless and Photonics CGU's. Operating losses
of £2,538,000 (H1 2024: £3,995,000 profit, 2024: £921,000) in the Group's
Wireless CGU and £12,756,000 (H1 2024: £7,495,000, 2024: £16,542,000) in
its Photonics CGU have been assessed as indicators of impairment such that an
impairment assessment of the non-current assets allocated to the Wireless and
Photonics CGU's has been performed.
The recoverable amount of the CGUs has been determined based on value in use
calculations, using cash flow projections for a five-year period plus a
terminal value based upon a long-term growth rate of 2% (H1 2024: 2%, 2024:
2%) in line with The Bank of England's and the US Federal Reserve's monetary
policy 2% inflation target.
Value in use calculations are based on the Group's latest five-year cash flow
forecasts which have been risk adjusted to reflect industry, market and
customer volume related risks and to exclude the impact of expansionary
capital expenditure and certain linked earnings and cash flows. The Group has
continued to experience weak customer demand and low customer orders following
the global semiconductor industry downturn as recovery has been slower than
anticipated in key sectors, driven primarily by geo-politics and weak consumer
demand in certain end markets. Revenue assumptions in year 1 reflect the lower
end of the Group's latest trading update with an assumed improvement in market
dynamics from H1 2026. Revenue assumptions for years 2 to 5 have typically
been extrapolated from year 2 using business segment growth rates that take
account of industry trends, external market research and new business
assumptions.
Year 1 Year 2 Year 3 Year 4 Year 5 5 Year
% % % % % CAGR
%
Unadjusted discount rate 18.8% 18.8% 18.8% 18.8% 18.8% N/A
Latest 2025
Photonics revenue growth rate and 2026 forecast
33.2%
19.3% 10.7% 19.3% 20.3%
Latest 2025
Wireless revenue growth rate and 2026 forecast 34.3%
27.7% 13.0% 14.0% 25.8%
Year 1 represents H2 2025 and H1 2026, year 2 represents H2 2026 and H1 2027,
year 3 represents H2 2027 and H1 2028, year 4 represents H2 2028 and H1 2029,
year 5 represents H2 2029 and H1 2030.
The assumptions and growth rates contained in the Group's value in use
calculations have been updated in 2025 compared to the assumptions contained
in the Group' prior year value in use calculations. The updated cashflow
forecasts reflect current market conditions, customer dynamics, latest
industry trends and external market research. The value in use calculations
comprise revenue, material costs and site manufacturing labour and overhead
cost forecasts that have been assessed and updated by reference to a
combination of customer and supplier specific information and a combination of
new business assumptions combined with business segment growth rates that take
account of industry trends, external market research and market growth
assumptions.
Photonics CGU
The recoverable amount of the Photonics CGU of £103,759,000, determined based
on value in use calculations is less than the carrying amount (£111,373,000)
of the associated intangible assets, property, plant and equipment,
right-of-use assets and working capital allocated to the CGU such that an
impairment of Photonics CGU assets has been identified. The impairment has
arisen because of persistent weakness in customer demand and low customer
orders as market recovery remains slower than anticipated.
The non-cash impairment loss of £7,614,000 relates to the Group's
predominantly UK-related photonics assets and has been allocated to goodwill
and other relevant assets which has resulted in a non-cash intangible asset
impairment charge of £6,968,000 (including £6,845,000 relating to goodwill),
non-cash property, plant and equipment impairment charge of £401,000 and a
non-cash right of use asset impairment of £245,000.
The Group has carried out a sensitivity analysis on the impairment test for
the Photonics CGU, using various reasonably plausible scenarios focused on
changes in business segment growth rates and changes in the discount rate
applied in the value in use calculations.
· Growth rates in the value in use calculations take account of
continuing market demand for compound semiconductors and associated technology
advancement, driven by macro trends of 5G, AI, connected devices and
defence/security applications that require enabling compound semiconductor
material. If the aggregated compound annual revenue growth rate used in the
value in use calculations to determine the recoverable amount was to decrease
by 1%, the impact on the impairment charge would be to increase the charge by
£8,268,000.
· If the discount rate used in the value in use calculations to
determine the recoverable amount was to increase by 0.5%, the impact on the
impairment charge would be to increase the charge by £4,486,000.
· If direct wafer product margins for all products used in the
value in use calculations to determine the recoverable amount were reduced by
1.0%, the impact on the impairment charge would be to increase the charge by
£6,374,000.
Wireless CGU
The recoverable amount of the Wireless CGU of £76,052,000 determined based on
value in use calculations is higher than the carrying amount (£75,379,000) of
the associated intangible assets, property, plant and equipment, right-of-use
assets and working capital allocated to the CGU such that no impairment of
Wireless CGU assets has been identified.
The Group has carried out a sensitivity analysis on the impairment test for
the Wireless CGU, using various reasonably plausible scenarios focused on
changes in business segment growth rates and changes in the discount rate
applied in the value in use calculations.
· Growth rates in the value in use calculations take account of
continuing market demand for compound semiconductors and associated technology
advancement, driven by macro trends of 5G and connected devices where 5G
network infrastructure and 5G mobile handsets are being enabled by next
generation wireless compound semiconductor material. If the aggregated
compound annual revenue growth rate used in the value in use calculations to
determine the recoverable amount was to decrease by 1% the magnitude of the
adverse impact on the recoverable amount of Wireless CGU non-current assets
would be £5,847,000.
· If the aggregated compound annual revenue growth rate used in the
value in use calculations to determine the recoverable amount was to decrease
by 0.2%, this would eliminate all the headroom in the value in use
calculation.
· If the discount rate used in the value in use calculations to
determine the recoverable amount was to increase by 0.5%, the magnitude of the
adverse impact on the recoverable amount of Wireless CGU non-current assets
would be £3,122,000.
· If the discount rate used in the value in use calculations to
determine the recoverable amount was to increase by 0.2%, this would eliminate
all the headroom in the value in use calculation.
· If direct wafer product margins for all products used in the
value in use calculations to determine the recoverable amount were reduced by
1.0%, the magnitude of the adverse impact on the recoverable amount of
Wireless CGU non-current assets would be £5,651,000.
· If direct wafer product margins for all products used in the
value in use calculations to determine the recoverable amount were reduced by
0.2%, this would eliminate all the headroom in the value in use calculation.
5. MATERIAL ACCOUNTING POLICIES
The accounting policies applied in these interim financial statements are the
same as those applied in the Group's consolidated financial statements as at
and for the year ended 31 December 2024. A number of new standards are
effective from 1 January 2025 but they do not have a material effect on the
Group's financial statements.
Recent accounting developments and the policy for recognising and measuring
income taxes in the interim period are described below.
5.1 Recent accounting developments
In preparing the interim financial statements, the Group has adopted the
following Standards, amendments and interpretations, which are effective for
2025 and will be adopted in the financial statements for the year ended 31
December 2025:
· 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.
The adoption of these standards and amendments has not had a material impact
on the interim financial statements.
5.2 Income tax expense
Income tax expense is recognised at an amount determined by multiplying the
loss before tax for the interim reporting period by management's best estimate
of the weighted-average annual income tax rate expected for the full financial
year, adjusted for the tax effect of certain items recognised in full in the
interim period. As such, the effective tax rate in the interim financial
statements may differ from management's estimate of the effective tax rate for
the annual financial statements.
6. PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties affecting the Group are set out in the
Strategic Report in the 2024 Annual report and financial statements, with the
addition of the risk relating to ageing assets, the increase in risk
associated with capital and liquidity and business environment arising from
the Group's financial position and ongoing strategic review. The principal
risks and uncertainties include:
· Health, safety, security and environment as the Group operates
several manufacturing sites which utilise potentially harmful gases, materials
and equipment
· Capital and liquidity as the Group's financial strength has been
severely impacted by the prolonged semiconductor industry-wide downturn,
inventory correction cycle across key sectors, broader macroeconomic factors
and the delayed market adoption of new technologies, in addition to
uncertainty arising from the Group's financial position and ongoing strategic
review
· Climate change and the long-term climate-related risks to the
Group's people, operations and financial performance
· Loss of key people as the Group's people are fundamental to its
future success and the Group operates in a highly competitive industry for
talent. Cost optimisation initiatives in recent years have resulted in a lean
workforce with some areas particularly stretched
· International trade compliance as the Group operates across
multiple jurisdictions in a highly regulated industry impacted by extra
jurisdictional controls on products, software and technology
· Intellectual property as the semiconductor industry is highly
competitive with competing intellectual property rights in the major
jurisdictions
· Information technology and cyber security as the Group primarily
functions using its information technology systems
· Business environment and demand from the Group's current and
future customer bases which may be reduced if there is a contraction in
investment, changes in expected customer demand, disruption due to the
geopolitical environment and/or the imposition of import tariffs or other
barriers to free trade, and in addition uncertainty arising from the Group's
financial position and ongoing strategic review
· Supply of raw materials as geopolitical tensions have resulted in
a specific risk related to the supply of critical compound semiconductor raw
materials such as Gallium, Antimony and Germanium, where current supply chain
routes are reliant on exports from China
· Risks relating to the Group's aged equipment and site
infrastructure, including single points of failure
7. SEGMENTAL INFORMATION
6 Months to 30 June 2025 6 Months to 30 June 2024 12 Months to 31 Dec 2024
Unaudited Unaudited Audited
£'000 £'000 £'000
Revenue
Wireless 18,596 38,779 67,295
Photonics 26,593 26,765 49,876
CMOS++ 65 474 863
Revenue 45,254 66,018 118,034
Adjusted EBITDA
Wireless 2,319 9,931 16,205
Photonics 3,572 4,359 5,840
CMOS++ (96) (891) (1,517)
Central corporate costs (6,179) (6,792) (12,416)
Adjusted EBITDA (384) 6,607 8,112
Depreciation (10,072) (10,619) (20,343)
Amortisation (2,492) (3,546) (6,390)
Gain on remeasurement - 296 202
Profit on disposal of PPE - 55 62
Adjusted operating loss (12,948) (7,207) (18,357)
Wireless (1,926) 4,981 6,520
Photonics (4,325) (4,338) (10,568)
CMOS++ (168) (964) (1,663)
Central corporate costs (6,529) (6,886) (12,646)
Adjusted items
Wireless (612) (986) (7,441)
Photonics (8,431) (3,157) (5,974)
CMOS++ (714) (79) (669)
Central corporate costs (748) (709) (517)
Operating loss (23,453) (12,138) (32,958)
Wireless (2,538) 3,995 (921)
Photonics (12,756) (7,495) (16,542)
CMOS++ (882) (1,043) (2,332)
Central corporate costs (7,277) (7,595) (13,163)
Finance income 117 - -
Finance costs (3,163) (1,765) (3,947)
Loss before tax (26,499) (13,903) (36,905)
8. ADJUSTED PERFORMANCE MEASURES
The Group's results report certain financial measures after a number of
adjusted items that are not defined or recognised under IFRS including,
adjusted earnings before interest, tax, depreciation and amortisation,
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.
6 months to 30 Jun 2025 6 months to 30 Jun 2024
Reported Reported 2024
Adjusted Adjusted Adjusted Adjusted Adjusted Adjusted Reported
£'000s Results Items Results Results Items Results Results Items Results
Revenue 45,254 - 45,254 66,018 - 66,018 118,034 - 118,034
Cost of sales (44,292) (431) (44,723) (60,316) (710) (61,026) (112,543) (1,045) (113,588)
Gross profit/(loss) 962 (431) 531 5,702 (710) 4,992 5,491 (1,045) 4,446
SG&A (13,845) (2,460) (16,305) (13,229) (2,982) (16,211) (24,109) (5,873) (29,982)
Impairment of intangibles - (6,968) (6,968) - - - - (3,772) (3,772)
Impairment of PPE - (401) (401) - (90) (90) - (4,615) (4,615)
Impairment of right-of-use assets - (245) (245) - - - - (31) (31)
Impairment (loss)/reversal of receivables (65) - (65) (31) - (31) (3) - (3)
Profit/(loss) on disposal of PPE - - - 55 (1,149) (1,094) 62 735 797
Gain on remeasurement of right of use asset - - - 296 - 296 202 - 202
EBITDA (384) (2,891) (3,275) 6,607 (3,692) 2,915 8,112 (6,918) 1,194
Depreciation (10,072) - (10,072) (10,587) - (10,587) (20,343) - (20,343)
Amortisation (2,492) - (2,492) (3,546) - (3,546) (6,390) - (6,390)
Impairment of intangibles - (6,968) (6,968) - - - - (3,772) (3,772)
Impairment of PPE - (401) (401) - (90) (90) - (4,615) (4,615)
Impairment of right-of-use asset - (245) (245) (32) - (32) - (31) (31)
Gain on remeasurement of right-of-use asset - - - 296 - 296 202 - 202
Profit on disposal of PPE - - - 55 (1,149) (1,094) 62 735 797
Operating loss (12,948) (10,505) (23,453) (7,207) (4,931) (12,138) (18,357) (14,601) (32,958)
Finance income 117 - 117 - - - - - -
Finance costs (3,163) - (3,163) (1,765) - (1,765) (3,947) - (3,947)
Loss before tax (15,994) (10,505) (26,499) (8,972) (4,931) (13,903) (22,304) (14,601) (36,905)
Taxation 462 - 462 (1,168) - (1,168) (1,430) 157 (1,273)
Loss for the period (15,532) (10,505) (26,037) (10,140) (4,931) (15,071) (23,734) (14,444) (38,178)
Loss per share
Basic loss per share (1.60p) (1.09p) (2.69p) (1.05p) (0.52p) (1.57p) (2.46p) (1.50p) (3.96p)
Diluted loss per share (1.60p) (1.09p) (2.69p) (1.05p) (0.52p) (1.57p) (2.46p) (1.50p) (3.96p)
6 months to 30 June 2025 Cost of SG&A Impairment Profit on disposal Pre-tax Tax Adjusted
£'000s sales Items impact items
Share based payments 431 914 - - 1,345 - 1,345
Share based payments - CFO recruitment - 36 - - 36 - 36
CEO severance - 8 - - 8 - 8
Photonics CGU impairment - - 7,614 - 7,614 - 7,614
Restructuring - 1,502 - - 1,502 - 1,502
Total 431 2,460 7,614 - 10,505 - 10,505
6 months to 30 June 2024 Cost of SG&A Impairment Profit on disposal Pre-tax Tax Adjusted
£'000s sales Items impact items
Share based payments 710 1,419 - - 2,129 - 2,129
Share based payments - CEO recruitment - 38 - - 38 - 38
Share based payments - CFO recruitment - 67 - - 67 - 67
CEO recruitment - 153 - - 153 - 153
Restructuring - 1,305 90 1,149 2,544 - 2,544
Total 710 2,982 90 1,149 4,931 - 4,931
2024 Reported Cost of SG&A Impairment Profit on disposal Pre-tax Tax Adjusted items
£'000s sales Items impact
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
The nature of the adjusted items is as follows:
Share based payments
The £1,345,000 (H1 2024: £2,129,000, 2024: 2,974,000) 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 £nil relates to the share-based payment charge (H1 2024:
£38,000, 2024: £77,000) and cash element (H1 2024: £153,000, 2024:
£307,000) of the new starter award granted to the former CEO upon
recruitment.
Chief Executive Officer Severance
The charge of £8,000 (H1 2024: £nil, 2024: £416,000) relates to costs,
primarily related to payments in lieu of notice, associated with the
termination of the former CEO's employment.
Chief Financial Officer recruitment
The charge of £36,000 (H1 2024: £67,000, 2024: £123,000) relates to the
share-based payment charge for new starter awards granted to the CFO.
Photonics CGU impairment
An impairment was identified in the period relating to the Photonics CGU
determined based on value in use calculations. The non-cash impairment loss of
£7,614,000 relates to the Group's predominately UK related photonics assets
and has been allocated to goodwill and the relevant UK based intangible and
tangible assets which has resulted in a non-cash intangible impairment charge
of £6,968,000 (including £6,845,000 relating to goodwill), non-cash
property, plant and equipment impairment charge of £401,000 and a non-cash
right of use asset impairment of £245,000.
Restructuring
The charge of £1,502,000 (H1 2024: £2,544,000, 2024: £7,638,000) 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 £249,000 (H1 2024 £nil, 2024:
£266,000) consist of employee related costs related to the restructuring of
the Group's Executive Leadership Team following the departure of the former
CEO.
US Restructuring
· US net restructuring charges of £nil (H1 2024: £2,496,000,
2024: £763,000) relating to the closure of the Group's manufacturing facility
in Pennsylvania. As at 30 June 2025, net cumulative restructuring charges of
£6,164,000 (H1 2024: £7,842,000, 2024: £6,164,000) have been incurred. No
further restructuring charges associated with the closure of the site are
expected in 2025.
· US restructuring charges of £33,000 (H1 2024: £nil, 2024:
£4,889,000) 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 £nil (H1 2024: £nil,
2024: £2,002,000), non-cash intangible development cost impairments of £nil
(H1 2024: £nil, 2024: £2,887,000) and reactor decommissioning costs of
£33,000 (H1 2024: £nil, 2024: £nil).
UK restructuring
· UK restructuring charges of £715,000 (H1 2024: £67,000, 2024:
£1,584,000) relating to the consolidation of the Group's South Wales
activities into its Newport manufacturing site consist of employee related
costs of £91,000 (H1 2024: £88,000, 2024: £447,000), site decommissioning
costs of £624,000 (H1 2024: £nil, 2024: £897,000), non-cash property, plant
and equipment asset impairments of £nil (H1 2024: £nil, 2024: £343,000) and
profit on disposal of PPE of £nil (H1 2024: £21,000, 2024: £103,000).
Asian Restructuring
· Taiwanese restructuring charges of £505,000 (H1 2024: £nil,
2024: £155,000) consist of legal and professional fees of £316,000 (H1 2024:
£nil, 2024: £155,000) relating to the dual track IPO or sale of the Group's
Taiwanese manufacturing operations and employee related costs of £189,000 (H1
2024: £nil, 2024: £nil) in relation to the restructuring of the Taiwanese
leadership team.
· Singapore restructuring credit of £nil (H1 2024: £19,000, 2024:
£19,000) relates to certain final cash receipts linked to the voluntary
liquidation of the Group's Singapore subsidiaries, where manufacturing
operations ceased in June 2022.
The cash impact of adjusting items is set out below:
6 months to 30 Jun 2025 6 months to 30 Jun 2024 12 months to 31 Dec 2024
Cash from Investing Cash from Investing Cash from Investing
£'000s operations activities Total operations activities Total operations activities Total
Reported cash flows 3,608 (2,682) 926 (2,632) (6,466) (9,098) 1,282 (10,194) (8,912)
Share-based payments - social security 80 - 80 117 - 117 123 - 123
CEO severance 534 - 534 - - - 196 - 196
Onerous contract 240 - 240 394 - 394 394 - 394
Restructuring 1,728 - 1,728 3,910 (851) 3,059 4,092 (4,828) (736)
Total adjusted items 2,582 - 2,582 4,421 (851) 3,570 4,805 (4,828) (23)
Adjusted cash flows 6,190 (2,682) 3,508 1,789 (7,317) (5,528) 6,087 (15,022) (8,935)
Onerous contract
Onerous contract cash flows reflect royalty payments relating to the Group's
cREO™ technology where development activity ceased in prior periods totals
£240,000 (H1 2024: £394,000, 2024: £394,000).
Restructuring
Cash defrayed in the period from the restructuring of the Group's Executive
Leadership Team and the consolidation of the Group's US, UK and Asian
manufacturing operations totalled £1,728,000 (H1 2024: 3,059,000, 2024:
£736,000 cash generated)
Group Restructuring
· Cash costs defrayed of £451,000 (H1 2024: £nil, 2024: £64,000)
consist of employee-related costs related to the restructuring of the Group's
Executive Leadership Team following the departure of the former CEO.
US Restructuring
· Cash costs of £57,000 (H1 2024: £3,841,000, 2024: £2,820,000)
relating to the closure of the Group's manufacturing facility in Pennsylvania
total £6,903,000. Cash proceeds on disposal of the Pennsylvania site included
in investing activities totals £nil (H1 2024: £nil, 2024: £4,061,000) in
the period.
UK Restructuring
· Cash costs relating to the consolidation of the Group's South
Wales activities into its Newport manufacturing site total £715,000 (H1 2024:
£88,000, 2024: £1,072,000). Cash proceeds on disposal of property, plant and
equipment is included in investing activities and totals £nil (H1 2024:
£851,000, 2024: £767,000) in the year.
Asian Restructuring
· Cash costs relating to the dual track IPO or sale of the Group's
Taiwanese manufacturing operations total £505,000 (H1 2024: £nil, 2024:
£155,000)
•
· Final cash receipts linked to the voluntary liquidation of the
Group's Singapore subsidiaries, where manufacturing operations ceased in June
2022 total £nil (H1 2024: £19,000, 2024: £19,000).
• Adjustments to net debt
(All figures £'000s) 6 months to 6 months to 12 months to
30 June 2025 30 June 2024 31 Dec 2024
Unaudited Unaudited Audited
Net debt (note 12) (69,835) (68,801) (69,330)
Lease liabilities due after one year 41,756 44,493 44,872
Lease liabilities due within one year 4,541 7,329 5,658
Adjusted net debt (23,538) (16,979) (18,800)
9. TAXATION
The Group's consolidated effective tax rate for the six months ended 30 June
2025 was (1.7%) (H1 2024: 8.4%, 2024: 3.4%). The effective tax rate differs
from the theoretical amount that would arise from applying the standard
corporation tax in the UK of 25.0% (H1 2024: 25.0%, 2024: 25.0%) principally
due to non-recognition of current year tax losses in the UK and USA.
10. LOSS PER SHARE
(All figures £'000s) 6 months to 6 months to 12 months to
30 June 2025 30 June 2024 31 Dec 2024
Unaudited Unaudited Audited
Loss attributable to ordinary shareholders (26,037) (15,071) (38,178)
Adjustments to loss after tax (note 8) 10,505 4,931 14,444
Adjusted loss attributable to ordinary shareholders (15,532) (10,140) (23,734)
Number of shares:
Weighted average number of ordinary shares 968,682,360 961,679,720 964,315,248
Potentially dilutive share options 9,961,212 8,031,368 14,291,760
Potentially dilutive convertible instruments 85,490,196 - -
1,064,133,769 969,711,088 978,607,008
Basic loss per share (2.69p) (1.57p) (2.46p) (3.28p)
Adjusted loss per share (1.60p) (1.05p) (3.96p) (2.68p)
Diluted loss per share (2.69p) (1.57p) (2.46p) (3.28p)
Adjusted diluted loss per share (1.60p) (1.05p) (3.96p) (2.68p)
Basic loss per share is calculated by dividing the loss attributable to
ordinary shareholders by the weighted average number of ordinary shares during
the period.
Diluted loss per share is calculated by dividing the loss attributable to
ordinary shareholders by the weighted average number of shares, convertible
instruments and 'in the money' share options in issue. Share options are
classified as 'in the money' if their exercise price is lower than the average
share price for the period. As required by IAS 33, this calculation assumes
that the proceeds receivable from the exercise of 'in the money' options would
be used to purchase shares in the open market to reduce the number of new
shares that would need to be issued. Potential ordinary shares shall be
treated as dilutive when, and only when, their conversion to ordinary shares
would decrease earnings per share or increase loss per share from continuing
operations.
11. CASH GENERATED FROM OPERATIONS
(All figures £'000s) 6 months to 6 months to 12 months to
30 June 2025 30 June 2024 31 Dec 2024
Unaudited Unaudited Audited
Loss before tax (26,499) (13,903) (36,905)
Finance income (117) - -
Finance costs 3,163 1,765 3,947
Depreciation of property, plant and equipment 8,223 8,796 16,552
Impairment of property, plant and equipment 401 90 4,615
Depreciation of right of use assets 1,849 1,791 3,791
Impairment of right of use assets 245 32 31
Amortisation of intangible assets 2,492 3,546 6,390
Impairment of intangible assets 6,968 - 3,772
Inventory provision write downs 174 469 391
Non-cash movement on trade receivable expected credit losses 65 31 3
Non-cash provision movements 702 143 288
Loss/(profit) on disposal of property, plant and equipment - 1,094 (797)
Gain on remeasurement of right of use asset - (296) (202)
Share based payments 1,381 2,234 3,174
Cash (outflow)/inflow from operations before changes in working capital (953) 5,792 5,050
(Increase)/decrease in inventories (201) (1,345) 3,677
Decrease/(increase) in trade and other receivables 6,531 (9,315) (608)
(Decrease)/increase in trade and other payables (994) 4,566 (3,938)
Decrease in provisions (775) (2,330) (2,899)
Cash inflow/(outflow) from operations 3,608 (2,632) 1,282
12. ANALYSIS OF NET DEBT
(All figures £'000s)
6 months to 6 months to 12 months to
30 June 2025 30 June 2024 31 Dec 2024
Unaudited Unaudited Audited
Bank borrowings due after one year (22,285) (23,220) (23,460)
Bank borrowings due within one year - (1,569) -
Convertible loan notes due within one year (18,243) - -
Lease liabilities due after one year (41,756) (44,493) (44,872)
Lease liabilities due within one year (4,541) (7,329) (5,658)
Total borrowings (86,825) (76,611) (73,990)
Cash and cash equivalents 16,990 7,810 4,660
Net debt (69,835) (68,801) (69,330)
On 17 May 2023, the Company refinanced its £25,200,000 ($35,000,000)
multi-currency revolving credit facility, provided by HSBC Bank plc. The
refinancing was treated as a debt modification. The facility is secured on the
assets of IQE plc and its subsidiary companies with a committed term to 1
September 2026. Interest on the facility is payable at a margin of between
2.50 and 3.50% per annum over SONIA on any drawn balances and the facility was
subject to quarterly leverage and interest cover covenant tests up until 10
March 2025 when the Group negotiated a Deed of Amendment and Restatement to
the facility which replaced the leverage and interest cover financial
covenants with minimum adjusted EBITDA and minimum liquidity covenants. The
facility was £22,372,000 (H1 2024: £23,220,000, 2024: £23,600,000) utilised
at 30 June 2025.
In the prior year, the Group obtained a formal waiver of its 31 December 2024
covenant tests from HSBC Bank plc and the Group has complied with all the
financial covenants of its borrowing facilities during 2025 and 2024. In the
post balance sheet period, the Group obtained a formal waiver of its minimum
EBITDA covenant test at 30 September 2025.
Cash and cash equivalents comprise balances held in instant access bank
accounts and other short-term deposits with a maturity of less than 3 months.
Convertible loan notes
On 13 March 2025, the Group issued £21,200,000 of convertible loan notes at a
discount of 15% with a maturity of one year. Gross subscriptions monies
received totalled £18,000,000. The Group has the option to extend this
maturity date by an additional 6 months by written notice. The notes are
convertible into ordinary shares of IQE Plc at the option of the holder at any
time before maturity at a conversion price of 15p per share. If not converted,
the notes will be redeemed at par on maturity. If the Group exercises its
option to extend the maturity period by six months, the notes will be redeemed
at par plus a redemption premium of 9% on maturity.
The instrument has been assessed under IAS 32 and contains both a liability
and equity component. On initial recognition, the fair value of the liability
component was measured using a market interest rate for an equivalent
instrument without a conversion feature. The residual value totalling
£206,000 was allocated to equity.
The liability component is subsequently measured at amortised cost using the
effective interest method.
13. SHARE BASED PAYMENT ARRANGEMENTS
Long term incentive awards
On 26 May 2000, as amended by shareholders at the Annual General Meeting on 17
May 2002, The Group established a share option plan that entitles the Group's
Remuneration Committee to grant long term incentive awards over shares in the
company to directors and employees of the Group.
On 31 May 2025 and 8 June 2025, long term incentive awards that are subject to
continued employment and/or achievement of performance conditions were awarded
to directors and employees of the Group. Performance conditions associated
with the awards include a combination of adjusted EBITDA margin targets and
the achievement of strategic objectives. Under the terms of these awards,
holders of vested options are entitled to purchase shares at the nominal value
of the shares at the date of grant. All options are to be settled by physical
delivery of shares. All options are to be settled by physical delivery of
shares. The terms and conditions of the share options granted during the six
months ended 30 June 2025 are as follows:
Contractual life of options
Number of instruments
Grant date/employees entitled Vesting conditions
Option grant to Executive Chair on 8 June 2025 166,667 N/A Immediately vested options subject to a three-year holding period from the
grant date.
Option grant to CEO on 8 June 2025 5,666,667 10 years Subject to a three-year performance period to 31 December 2027 and a
two-year holding period following vesting. Vesting of 75% of the Options will
be determined by threshold and stretch targets for the Company's Adjusted
EBITDA Margin in the financial years ending 31 December 2026 and 31
December 2027, and vesting of 25% of the Options will be determined by certain
non-financial and strategic measures.
Option grant to employees on 31 May 2025 25,315,501 10 years 1-3 years of service from grant date and also certain strategic measures for
members of the Executive Leadership Team.
Measurement of grant date fair values
The fair value of the long-term incentive awards, calculated as £3.1m (H1
2024: £nil, 2024: £3.3m) at the grant date has been determined using the
Black Scholes model. The following inputs were used in the measurement of the
fair values at grant date.
Principal assumptions 2025 2024
Weighted average share price at grant date 16.80 27.34
Weighted average exercise price 1.57 1.76
Weighted average vesting period (years) 2 2
Option life (years) 10 10
Weighted average expected life (years) 2 2
Weighted average expected volatility factor 66% 66%
Weighted average risk-free rate 4.0% 3.8%
Dividend yield 0% 0%
The expected volatility factor is based on historical share price volatility
over the three years immediately preceding the grant of the option. The
expected life is the average expected period to exercise. The risk-free rate
of return is the yield of zero-coupon UK government bonds of a term consistent
with the assumed option life.
Non-market performance conditions are incorporated into the calculation of
fair value by estimating the proportion of share options that will vest and be
exercised based on a combination of historical trends and future expected
trading performance. These are reassessed at the end of each period for each
tranche of unvested options.
14. SHARE CAPITAL
6 months to 6 months to 12 months to
Number of shares 30 June 2025 30 June 2024 31 Dec 2024
Unaudited Unaudited Audited
As at 1 January 967,251,117 961,518,692 961,518,692
Employee share schemes 9,279,407 5,114,245 5,732,425
As at 30 June / 31 December 976,530,524 966,632,937 967,251,117
6 months to 6 months to 12 months to
(All figures £'000s) 30 June 2025 30 June 2024 31 Dec 2024
Unaudited Unaudited Audited
As at 1 January 9,672 9,615 9,615
Employee share schemes 93 51 57
As at 30 June / 31 December 9,765 9,666 9,672
15. COMMITMENTS
The Group had capital commitments at 30 June 2025 of £84,000 (H1 2024:
£452,000, 2024: £162,000).
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted for use in the
UK;
· the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
Jutta Meier
Chief Executive Officer / Chief Financial Officer, IQE plc.
22 September 2025
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