IQE earnings fall as supply chain issues hamper revenues

British semiconductor manufacturer IQE confirmed investors on Friday that earnings were set to slip following a trading year heavily impaired by supply chain issues.

IQE now expects EBITDA to be somewhere in the vicinity of £27.5m - a significant drop on the £37m posted a year earlier, but only slightly less than the market was expecting.

The AIM-listed firm also said it would have to face more than £8.8m in charges as it closes its facility in New Jersey and faces an onerous lease accounting provision for the period through to the end of the second quarter of 2022 for unused and unlet space at its facility in Singapore.

Net cash tumbled 54.3% to £20.8m. This week the company agreed a new $35m multi-currency revolving credit facility with a three-year term, which is secured over the assets of IQE.

Despite the decreased revenues, disruptions and one-off charges, IQE, maintained its 2019 full year guidance.

Chief executive Drew Nelson said: "It is of course very disappointing that a substantial inventory correction in the first half of 2018 and the sudden disruption in a significant supply chain and short-term demand for VCSEL wafers in November materially impacted our expected 2018 revenues and profitability."

"However, the position and prospects of IQE will not be defined by our 2018 financial results which were delivered with none of the benefits of the investment programs which are now nearing completion."

As of 1255 GMT, IQE shares had slipped 1.41% to 73.45p.

Jamie Constable at broker N+1Singer noted that while making further downgrades to their 2018 guidance, IQE had maintained 2019 numbers as the new customers come on stream.

"2019 has always been about the new VCSEL customers coming on board and they reiterate this is occurring. We believe the shares are cheap here but market needs to see evidence of 2019 execution before they will reward management with share price move," he said.