26th Mar 2014 15:24
LONDON (Alliance News) - IQE PLC Wednesday expressed confidence that it would meet full-year earnings expectations for 2014, after it saw pretax profit drop for 2013, as higher revenue was offset by higher sales costs and reorganisation costs.
IQE supplies semiconductor wafers for consumer applications, wireless communications and produces optoelectronic and photonic components.
The company posted a pretax profit of GBP5.2 million, down from GBP6.1 million in the previous year, as revenue rose to GBP126.8 million from GBP88.0 million, boosted by its acquisition of Kopin Inc, which contributed revenues of GBP30.9 million.
This rise in revenue was offset by higher sales costs and one-off costs of GBP7.5 million including acquisition, restructuring and re-organisation costs and impairment charges.
IQE posted a GBP3.2 million write down over its investment in Solar Junction, GBP2.4 million in restructuring and reorganisation costs and GBP1.5 million charge for acquisition related inventory fair value adjustment.
IQE said it had reorganised its business, and improved operational efficiency as part of its market diversification strategy. This involved re-organising into business units to match each of its primary markets. The company said it was on track to eliminate duplicate overheads, which it says will save over GBP7 million on a yearly basis.
The company's wireless division saw continued growth despite a significant downstream inventory correction at major chip companies due to the slumping high end smart-phone market.
"The smart phone market is one of these markets that goes through periods of rapid growth and rapid consolidation; I think this is mainly because there's not much innovation in new handsets. If you've got an iPhone 5s versus an iPhone 5 there's not much new on them, so are you going to rush out to buy the latest model?" Chief Executive Andrew Nelson told Alliance News.
"That's reflected in both Apple and Samsung, their sales for new products have been pretty muted," said Nelson. "What we think will drive the next innovation in handsets will be the incorporation of various senses and various optical devices that give you a completely new level of interaction with the environment."
IQE is looking to protect itself from the risk of market shifts, like the slowing growth in high end smart-phones, through its product risk mitigation strategy, which included its acquisition of competitor Kopin Inc in January 2013. The company has no particular plans for further acquisitions; The acquisition of Kopin was primarily about securing a customer called Skyworks Solutions Inc. to secure market share.
"Our objective is that we have products that cover the entire communications network," Nelson said.
Outside of its key wireless segment, Nelson said the most interesting areas of growth are in its photonics business.
"There's so many applications for these vertical cavity lasers; you get these products incorporated in lots of consumer devices, they'll be in gaming devices, they'll be in handsets, they'll be in data centres," Nelson said.
Shares in IQE were trading down 1.1% at 23.50 pence Wednesday afternoon.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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