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2010 Full Year Results


March 29, 2011 - London


Strong growth across all markets triples profits 


IQE plc (AIM: IQE, "IQE" or the "Group"), the leading global supplier of advanced wafer products and wafer services to the semiconductor industry, publishes final results for the year ended 31 December 2010.

 

Financial highlights 

  • Revenues up 38% to  £72.7m (2009: £52.7m); H2 unaudited revenues £39.6m
  • Continued improvement in gross margins, up from 21.9% to 22.8%
  • EBITDA up 63% to £13.1m (2009: £8.1m) reflecting high operational gearing
  • Pre-tax profit triples to £6.3m, (2009: £2.1m)
  • Basic EPS up 247% to 1.63p (2009: 0.47p)
  • Capital expenditure of £5.0m (2009: £1.7m) on additional capacity to meet expected continued growth in revenues
  • Strong conversion of EBITDA into operating cash of £10.2m (2009: £7.7m)
  • Tax credit of £1.2m due to R&D tax refunds (£0.5m) and recovery of tax losses (£0.7m)
  • Strengthened balance sheet following successful placing ; raising gross proceeds of £20.8m
  • Net cash of £7.0m (2009: Net debt £14.9m)


Operational highlights

  • Strong revenue growth in primary markets reflects buoyantend markets and increasing market share
  • Rapid revenue growth of range of emerging optoelectronic products signals move towards volume production
  • Further strengthening of IP portfolio, including grant of nanocolumn patent in Japan
  • Galaxy Compound Semiconductors, Inc. ('Galaxy'), acquired in September 2010, has integrated well and performed very strongly

Dr Drew Nelson, IQE Chief Executive, said:

 

"2010 has been an outstanding year for the Group, with record revenues and profits achieved; a clear delivery on our strategic and operational goals.

 

"Our core business of high speed connectivity, including wireless-related products for all forms of mobile device communications has continued to show very strong growth, whilst new and emerging products for consumer, energy efficiency, industrial and defence applications are generating increased demand across all our key markets.

 

"We continue to make excellent progress in the development and commercialisation of key IP that we expect will contribute to revenues during 2011 and help to increase our competitive advantage and leading positions in a number of high-growth markets.

 

"In terms of the four  technology 'megatrends' of this decade - high-speed communications, energy efficiency, security  and lifestyle - we are helping drive these with our key enabling technologies.The Board remains confident that IQE is well positioned to continue its strong growth in 2011 and beyond."

 

Contacts:

 

IQE plc +44 29 2083 9400
Drew Nelson
Phil Rasmussen
Chris Meadows
College Hill +44 20 7457 2020
Adrian Duffield/Kay Larsen
Espirito Santo Investment Bank +44 20 7456 9191
Richard Crawley/James Bromhead

 

Note to Editors

IQE is the leading global supplier of advanced semiconductor wafers with products that cover a diverse range of applications, supported by an innovative outsourced foundry services portfolio that allows the Group to provide a 'one stop shop' for the wafer needs of the world's leading semiconductor manufacturers.

IQE uses advanced crystal growth technology (epitaxy) to manufacture and supply bespoke semiconductor wafers 'epi-wafers' to the major chip manufacturing companies, who then use these wafers to make the chips which form the key components of virtually all high technology systems. IQE is unique in being able to supply wafers using all of the leading crystal growth technology platforms.

IQE's products are found in many leading-edge consumer, communication, computing and industrial applications, including a complete range of wafer products for the wireless industry, such as mobile handsets and wireless infrastructure, Wi-Fi, WiMAX, base stations, GPS, and satellite communications; optical communications, optical storage (CD, DVD), laser optical mouse, laser printers & photocopiers, thermal imagers, leading-edge medical products, barcode, ultra high brightness LEDs, a variety of advanced silicon based systems and high efficiency concentrator photovoltaic (CPV) solar cells.

The manufacturers of these chips are increasingly seeking to outsource wafer production to specialist foundries such as IQE in order to reduce overall wafer costs and accelerate time to market.

IQE also provides bespoke R&D services to deliver customised materials for specific applications and offers specialist technical staff to manufacture to specification either at its own facilities or on the customer's own sites. The Group is also able to leverage its global purchasing volumes to reduce the cost of raw materials. In this way IQE's outsourced services, provide compelling benefits in terms of flexibility and predictability of cost, thereby significantly reducing operating risk.

IQE operates a number of global manufacturing and R&D facilities: Cardiff, Milton Keynes and Bath in the United Kingdom; Bethlehem, Pennsylvania, Somerset, New Jersey and Spokane, Washington in the USA; and Singapore. The Group also has 11 sales offices located in major economic centres worldwide.

 


 

Overview and strategic opportunity

 

2010 proved to be an outstanding year with the Group delivering on its key strategic, operational and financial objectives, well ahead of the Board's expectations.On revenues up 38% to £72.7m, the Group's extremely high operational gearing delivered a tripling of pre-tax profits and earnings to £6.3m and 1.63p respectively.

 

Furthermore, the strong cash generation plus a highly successful fund raising in support of the acquisition of Galaxy, has resulted in a strengthening of the Group's balance sheet.

 

It is clear that four current technology "megatrends" will be the main growth drivers for IQE over the next decade: namely high-speed connectivity; sustainable clean energy generation and the efficient use of energy; the explosion of personal consumer devices for enhanced lifestyle, and the increased sophistication and performance of security related systems. Each involves a wave of technology upgrades driven by economic, environmental, consumer or regulatory pressures, and each is being enabled to a very large degree by compound semiconductor materials and technology. IQE is contributing strongly to each of these megatrends across all of its business segments.

 

As the leading global provider of compound semiconductor materials solutions, IQE provides the key technologies that are already supporting these megatrends as they transform a wide range of markets. 

 

The wireless communications market enjoyed very rapid growth in 2010, due largely to the smartphone phenomenon. Global shipments of smartphones grew by more than 70% and with smartphones still only representing22% of all handsets sold, this strong growth is set to continue for many years to come.

 

Furthermore, the launch of tablet devices, the rollout of 4G and LTE, and the adoption of high speed wireless technology around the world will drive rapid growth in wireless devices and the data communications they support.

 

IQE has gone from strength to strength in the wireless market. Wireless sales grew by more than 32% and the superior performance and delivery of the Group's products has been recognised by several customers including TriQuint and Avago, who both identified IQE as their Supplier of the Year.

 

With a strong balance sheet and increased capacity, following the fundraising in September 2010, IQE is more than capable of supporting customers' ambitions for growth and delivering the high-performance products they demand on a global scale.

 

The emerging optoelectronics business grew at an even faster rate than wireless, albeit from a lower base, achieving organic year on year growth of more than 46%. This growth was enhanced by the acquisition of Galaxy to deliver an overall increase of more than 56%.

 

With a number of emerging high-volume and mass-market applications, the Group believes its optoelectronics business has the potential to eclipse wireless growth on a sustained basis, and to eventually evolve into a business with the current scale and profitability of the wireless operation.

 

Within optoelectronics, markets with the highest growth potential include:

  • Consumer optoelectronics, including finger navigation devices, optical interconnects (such as Intel's Lightpeak/'Thunderbolt'), miniature laser projectors (pico-projectors), cosmetic lasers and gesture recognition gaming devices;

  • Solar power generation (CPV) using compound semi conductors that are already more than 40% efficient compared with conventional silicon systems, which are less than 15% efficient. It is predicted by industry experts that CPV could be capable of generating electricity at least as cheaply as fossil fuels.

  • Solid state lighting (SSL) technology is the natural successor to incandescent light bulbs, which are being phased out across the world. IQE is at the cutting edge of developing advanced materials necessary for ultra-efficient (low cost) light emitting diodes (LEDs) for commercial and residential lighting.

IQE's optoelectronics sales are already beginning to reflect the benefit of pre-production revenues generated from consumer applications and concentrated photovoltaics (CPV).In particular, sales of VCSELs (advanced lasers that are critical for finger navigation and optical interconnects) grew by approximately 120%, whilst sales of CPV material grew by more than 80%.

 

The acquisition of Galaxy in September 2010 has been very successful, both operationally and financially. In combination with the Group's Wafer Technology subsidiary, IQE is now market leader for antimonide wafers used in infra-red applications, with what we believe to be the best technology delivered at the most attractive cost through a unique, dual-site production capability.

 

From a technical perspective, the Group continues to make excellent progress. The programme of new product qualifications in both wireless and optoelectronics continues to strengthen IQE's market leadership, a position reinforced by the development of pioneering VCSEL products for high-speed optical communications. IQE remains at the forefront of CPV development, producing materials with world-class efficiencies in excess of 40%.

 

The Group was granted new patents across a number of products including NanoGaN's nanocolumn technology for high-purity gallium nitride (GaN) substrates.

 

IQE is now the clear global leader in the market for compound semiconductor materials, whose superior properties are proving essential to next-generation technologies in rapidly growing markets. Its technologies are driving innovation in high-speed communications, energy efficiency, consumer electronics and industrial applications to levels hitherto unachievable by any other technology.

 

Financial Review

 

Revenues grew by 38% to £72.7m (2009: £52.7m) driven by increased volumes in all primary markets. Second-half revenues were 20% higher than H1 and a new record for the Group.

 

Gross margins improved from 21.9% to 22.8%, reflecting continued strong management of costs and further operating efficiencies. The margin in 2009 included the benefit of one-off cost savings achieved during a period of destocking.

Selling, general and administrative expenses were £9.4m (2009: £8.5m), reflecting an investment in people, one-off costs relating to the Galaxy acquisition, general inflationary pressures and the impact of one-off cost savings in 2009 achieved during the destocking.

 

EBITDA increased 63% to £13.1m (2009: £8.1m), and operating profit increased 137% from £3.0m to £7.2m.These significant increases principally reflect the benefit of increased sales and the Group's high operational gearing.

 

The interest charge in the year was £0.9m (2009: £1.1m), 11% lower.

 

The Group pre-tax profit more than tripled to £6.3m, (2009: £2.1m).

 

The Group benefited from a £1.2m tax credit relating to £0.5m of R&D tax refunds in the UK, and the recognition of £0.7m of deferred tax in respect of tax losses.The Group has £31.5m of tax losses carried forward.

Retained profit rose 264% to £7.5m (2009: £2.1m), resulting in a 247% increase in earnings per share to 1.63p (2009: 0.47p).

 

Cash conversion was strong, with an operating cash inflow of £10.2m (2009: £7.7m).

 

The Group invested £3.4m (2009: £2.3m) in development expenditure, relating to the qualification of new wireless and optoelectronic products and the development of new solar and gallium nitride materials. These investments are expected to result in higher sales in the future.

 

The Group increased capital expenditure to £5.0m (2009: £1.7m) to fund additional capacity to meet future demand for products. . In addition, the Group disposed of a property in Singapore for consideration of £1.5m, realising a profit of £0.4m.

 

A placing of 65 million new shares announced on 30 September 2010 raised gross proceeds of £20.8m, which was used to repay borrowings, finance capital expenditure and fund the acquisition of Galaxy. The Group incurred transactional expenses of £0.1m relating to the acquisition of Galaxy.

 

Net cash at 31 December 2010 amounted to £7.0m (2009: net debt £14.9m).

 

 

Markets

 

IQE's three primary markets are wireless, optoelectronics and electronics.

 

Wireless

The wireless market accounted for approximately 75% of Group sales in 2010. It spans a broad range of applications from mobile phones, tablet computers, laptops, netbooks, wifi enabled devices, GPS devices, mobile infrastructure, and satellite TV.

 

The market has grown rapidly in recent years reflecting the increasing adoption of wireless technology, multiplied by the need for a greater content of compound semiconductor material per device, as wireless communications become more sophisticated.

 

All the major wireless chip companies use IQE's compound semiconductor epiwafers to create integrated circuits known as RF chips. These, in turn, enable wireless communication and are being used in increasing numbers as handsets and other devices become more sophisticated and use a wider range of wireless systems (e.g. 3G, 4G (LTE), WiFi, WiMAX, GPS, NFC, DBTV).

 

IQE is the industry's largest epitaxial foundry, with an estimated market share of over 30% - almost twice the size of its nearest competitor. Key factors enabling IQE to increase market share include:

 

  • Technology leadership

  • Cost leadership

  • Industry's most diverse product range

  • Security and diversity of supply

In addition, IQE is qualified and in production with all of the major wireless chip companies, providing good mitigation against the potential impact of end user market-share swings between them.

 

The wireless communications market continues to represent a very exciting long-term growth prospect for IQE due to three key factors:

 

  • Continuing strong market growth, fuelled by unit growth and content growth
  • The continuation of the trend to outsourcing of epitaxy
  • Opportunity for IQE to leverage its USPs and continue to grow market share

 

Optoelectronics

 

Optoelectronics accounted for approximately 20% of IQE's sales in 2010. In broad terms, optoelectronics refers to devices that convert electricity into light (lasers and LEDs) or light into electricity (fibre optic communication receivers and solar power generation). It is a diverse market with a broad range of applications including LEDs, solar cells, lasers for data storage (CD, DVD, BluRay), lasers for office applications (laser printers, laser mouse), medical, cosmetic and industrial lasers, and components for fibre-optic communication systems covering all applications from USB cables to long distance telecommunication networks.

 

IQE has long been a pioneer in the field of optoelectronics and continues to push the capabilities of this technology in cutting-edge research projects with a number of multi-national, blue-chip partners.

 

This technical expertise uniquely positions IQE to benefit from a number of emerging high-growth opportunities, particularly in consumer optoelectronics, solar power and solid state lighting. These are likely to increase the scale of IQE's optoelectronics business in the coming years, albeit that different market segments are likely to grow at different rates.

 

Consumer Optoelectronics

 

This diverse area is set to expand very rapidly in the coming years as optical technologies take off in high-growth consumer markets, such as optical interconnects, miniature laser projectors, optical storage (BluRay), cosmetic applications and gesture recognition.

 

Advanced Solar Power

 

The efficiency at which solar cells convert sunlight into electricity is a key determinant in their size and cost.Conventional solar technology uses materials that are very inefficient in converting sunlight into electricity.Specifically, silicon solar panels are typically less than 15% efficient, and thin film technology is typically less than 10% efficient. Because of the fundamental properties of the materials they use, there is very little scope to improve their efficiency. Furthermore, to harvest a square metre of sunlight requires a square metre of what is an expensive solar material.

 

By contrast, Concentrated PhotoVoltaic (CPV) systems use cheap lenses or mirrors to focus rays of sun light onto small, high-performance solar cells that collect and convert the light into electrical energy. CPV cells use compound semiconductors that use multiple layers of finely tuned materials to absorb sunlight across a wider range of wavelengths. As a result, they are far more efficient than conventional solar cells, with efficiencies of more than 40% already achieved and 50% efficiency a realistic goal.  

 

The commercialisation of this technology continues to progress.Feedback from initial field trials of CPV installations has been very encouraging and in line with forecast results. The expansion of larger field trials is expected to continue as utility companies extend their feasibility testing. Further development of the technology will improve efficiency and reduce cost, both of which will drive the wider adoption of CPV as a mass-market source of energy.

 

With cutting-edge technology and a well developed network of solar cell and system partners, IQE is well placed to benefit from the rapid growth expected when CPV technology moves from field trials to commercial mass production. 

 

Solid-state lighting  

 

Already, many continents have introduced wide-ranging legislation to progressively ban incandescent lighting. Alternative low-energy lighting such as compact fluorescent technology is unpopular because of the perception it provides low quality illumination, and because of ongoing issues with its heavy metal content, including mercury.

 

As a significantly more efficientsafer and longer lifetime alternative, solid-state or LED lighting is widely viewed as the only credible replacement for the incandescent bulb.Efficient energy consumption will remain a key driver in the development and adoption of this technology, but the critical success factor is reducing cost and improving the ambience of these units.

 

High-quality gallium nitride provides the technology to achieve this, which the Group believes will revolutionise residential and commercial lighting over the coming years and the technology developed through the acquisition of NanoGaN will make an increasingly significant and lasting contribution to this field.

Electronics

 

IQE's electronics business provides advanced epitaxy services on silicon. Although this division accounts for less than 5% of Group sales, it is of long-term strategic importance as the chip industry struggles to deal with the fundamental limitations of silicon and looks to combine it with compound semiconductors for greater performance.

 

Key applications include:

  • Power switching -a highly efficient switching technology to reduce energy losses
  • Advanced Electronics and MicroElectroMechanical Systems (MEMS) - for accelerometers used in smartphones, airbags, etc, miniature gyroscopes,
  • High-speed electronics - overcoming Moore's Law

 

Working with some of the biggest names in the industry, IQE has established a powerful position in these advanced technologies, a fact reflected in the number of joint patents awarded with Intel for the production of III-V materials on silicon substrates.

 

The Group believes its intellectual property has the potential to make a very significant contribution to the development and introduction of this game changing technology.

 

Acquisition of Galaxy Compound Semiconductors Inc

 

On 30 September 2010, IQE acquired US-based Galaxy to complement its Wafer Technology division in the UK. This acquisition positioned IQE as the clear market leader for the provision of advanced gallium antimonide and indium antimonide substrates for use in infra-red sensing applications. In addition to providing IQE with access to the US market, particularly the defence, commercial and medical imaging sectors, it created similar benefits to those enjoyed in IQE's epitaxial business, namely technology leadership, cost leadership (economies of scale), and a unique dual-source capability.

 

Antimonide materials are used in a range of infrared or heat sensing applications. The sensitivity of current heat sensors enables only a monochrome image so that devices such as night vision can only see in tones of green and black. The new antimonide materials allow greater sensitivity so that different wavelength infrared emissionscan be distinguished, effectively producing full colour "night vision" images. The improved sensitivity is powerful for search and rescue operations and the full-colour night vision capability has major uses in both military and commercial applications such as accurate navigation in low or zero-visibility conditions (FLIR), surveillance and identification, to name but a few.

 

Current trading and outlook

IQE is clearly established as the leading supplier of advanced epitaxial wafer products to the global semiconductor industry. Driven by innovation, scale and cost competitiveness the Group has delivered consistent, high performance growth in a demanding, highly technical, leading edge industry.

 

The current year has started well, in line with the Board' expectations, with the Group continuing to benefit from its very high operational gearing and market leading position across a wide range of fast growing global markets.

 

In respect of the recent natural disaster which struck Japan, has been no direct impact to date on the Group's businesses and at this stage the Group does not expect any change to its performance. Nonetheless the Board wishes its partners and associates a speedy and complete recovery from this tragedy.

 

The Board remains fully confident in the future of the business, the growth of its markets and the ability of IQE to execute and deliver a strategy to increase revenue, profitability and cash generation in the coming months and years.

 

 

Dr Drew Nelson OBE

President & Chief Executive Officer

29 March 2011


CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2010

 

 

 

Note
H2 2010

£'000

unaudited
H2 2009

£'000

unaudited
2010

£'000

audited
2009

£'000

audited
Revenue 2 39,633 31,231 72,650 52,652
Cost of sales (30,366) (23,459) (56,050) (41,073)
Gross profit 9,267 7,772 16,600 11,579
Selling, general and administrative expenses (4,749) (3,895) (9,392) (8,535)
Operating profit 2 4,518 3,877 7,208 3,044
Finance costs (385) (458) (874) (986)
Profit before tax 4,133 3,419 6,334 2,058
Tax 1,172 - 1,172 -
Profit for the period attributable to equity shareholders 5,305 3,419 7,506 2,058
Adjusted earnings per share 3 1.31p 0.91p 1.91p 0.68p
Basic earnings per share 3 1.13p 0.77p 1.63p 0.47p
Adjusted diluted earnings per share 3 1.22p 0.87p 1.76p 0.64p
Diluted earnings per share 3 1.06p 0.71p 1.50p 0.44p

 

 

 

EBITDA (Earnings before Interest, Taxes, Depreciation and Amortisation)

is calculated as follows:

 

2010

£'000
2009

£'000
Profit attributable to equity shareholders 7,506 2,058
Taxes (1,172) -
Share based payments 1,302 898
Net finance costs 874 986
Depreciation of tangible fixed assets 3,619 3,372
Amortisation of intangible fixed assets 986 737
EBITDA 13,115 8,051
EBITDA was generated during the period as follows:
H1 EBITDA (unaudited) 5,417 1,909
H2 EBITDA (unaudited) 7,698 6,142
Full year EBITDA (audited) 13,115 8,051

 

 


 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2010

2010

£'000
2009

£'000
Profit/(loss) for the period 7,506 2,058
Currency translation differences on foreign currency net investments 3,095 (3,859)
Cash flow hedges 116 -
Revaluation gain of initial investment on acquisition - 28
Total comprehensive income/(expense) for the period 10,717 (1,773)

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2010

 

Share capital Share premium Retained earnings Exchange rate reserve Other reserves Total equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2010 4,435 1,150 20,513 1,745 1,994 29,837
Comprehensive income
Profit for the period - - 7,506 - - 7,506
Foreign exchange translation differences - - - 3,095 - 3,095
Cash flow hedges - - - - 116 116
Total comprehensive income - - 7,506 3,095 116 10,717
Transactions with owners
Employee share option scheme - - - - 446 446
Share placing 650 19,226 - - - 19,876
Other issues of ordinary shares 68 861 - - 469 1,398
Total transactions with owners 718 20,087 - - 915 21,720
Balance at 31 December 2010 5,153 21,237 28,019 4,840 3,025 62,274
 

Balance at 1 January 2009 4,333 124 18,455 5,604 1,702 30,218
Comprehensive income
Profit for the period - - 2,058 - - 2,058
Foreign exchange translation differences - - - (3,859) - (3,859)
Revaluation gain on business combination - - - - 28 28
Total comprehensive income - - 2,058 (3,859) 28 (1,773)
Transactions with owners
Employee share option scheme - - - - 264 264
Shares issued for business combination 58 709 - - - 767
Other issues of ordinary shares 44 317 - - - 361
Total transactions with owners 102 1,026 - - 264 1,392
Balance at 31 December 2009 4,435 1,150 20,513 1,745 1,994 29,837

 

CONSOLIDATED BALANCE SHEET
as at 31 December 2010

 

Note
2010

£'000
2009

£'000

restated
Non-current assets:
Intangible assets 30,645 18,474
Property, plant and equipment 23,804 21,365
Deferred tax asset 824 -
Total non-current assets 55,273 39,839
Current assets:
Inventories 11,603 10,789
Trade and other receivables 16,741 13,261
Cash and cash equivalents 5 12,507 4,233
Total current assets 40,851 28,283
Total assets 96,124 68,122
Current liabilities:
Borrowings 5 (4,077) (6,573)
Trade and other payables (20,073) (16,770)
Total current liabilities (24,150) (23,343)
Non-current liabilities:
Borrowings 5 (1,409) (12,591)
Other payables (8,291) (2,351)
Total non-current liabilities (9,700) (14,942)
Total liabilities (33,850) (38,285)
Net assets 62,274 29,837
Shareholders' equity:
Ordinary shares 5,153 4,435
Share premium 21,237 1,150
Profit and loss account 28,019 20,513
Other reserves 7,865 3,739
Total shareholders' equity 62,274 29,837

 

 

The restatement of the 2009 balance sheet relates to the reassessment during 2010 of the fair value of deferred consideration payable on the acquisition of NanoGaN Limited (as required by IFRS 3). As a result the fair value of the deferred consideration has been reduced by £708,000, with a corresponding adjustment to capitalised development costs. The restatement has no impact on net assets or shareholders' equity.


CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2010

 

 

Note
H2 2010

£'000

unaudited
H2 2009

£'000

unaudited
2010

£'000

audited
2009

£'000

audited
Cash flows from operating activities:
Cash inflow from operations 4 8,359 7,617 10,250 7,712
Net interest paid (351) (540) (904) (1,099)
Income tax received 361 - 361 -
Net cash inflow from operating activities 8,369 7,077 9,707 6,613
Cash flows from investing activities:
Acquisition of NanoGaN Limited - (205) - (205)
Acquisition of Galaxy Compound Semiconductors, Inc 1 - 1 -
Development expenditure (1,640) (1,409) (3,379) (2,325)
Investment in other intangible fixed assets (218) (248) (389) (248)
Purchase of property, plant and equipment (3,918) (744) (4,995) (1,660)
Proceeds from sale of property, plant and equipment - - 1,467 -
Net cash used in investing activities (5,775) (2,606) (7,295) (4,438)
Cash flows from financing activities:
Issues of ordinary share capital 20,475 356 20,512 596
Loans and leases received (12,003) 3,022 (14,741) 2,778
Net cash generated from financing activities 8,472 3,378 5,771 3,374
Net increase in cash and cash equivalents 11,066 7,849 8,183 5,549
Cash and cash equivalents at 1 January 4,233 (928)
Exchange losses on cash and cash equivalents 91 (388)
Cash and cash equivalents at 31 December 5 12,507 4,233

 

 

 

 


NOTES TO THE RESULTS                    

 

 

1.       Basis of preparation

 

These results have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and interpretations in issue at 31 December 2010.

 

The preliminary results were approved by the Board of Directors and the Audit Committee on 28 March 2011. These results do not constitute statutory accounts within the meaning of the Companies Act 2006. All figures are taken from the 2010 audited annual accounts unless denoted as 'unaudited'. Comparative figures in the results for the year ended 31 December 2009 have been taken from the 2009 audited annual accounts.

 

These results will be announced to all shareholders on the London Stock Exchange and published on the Group's website on 29 March 2011. Copies will be available to members of the public upon application to the Finance Director at Pascal Close, Cardiff, CF3 0LW.

 

 

 

2.       Segmental analysis

 

The Group considers its three key market areas of wireless, optoelectronics and electronics to be its primary reporting segments, based on the reports reviewed by the board of directors that are used to make strategic decisions.

 

 

 

Revenues by business segment : 2010

£'000
2009

£'000
Wireless 55,062 41,598
Optoelectronics 15,393 9,843
Electronics 2,195 1,211
Total revenue 72,650 52,652
 

EBITDA by business segment :
Wireless 11,093 8,359
Optoelectronics 1,874 (46)
Electronics 148 (262)
Total EBITDA 13,115 8,051
 

Operating profit/(loss) by business segment :
Wireless 6,748 4,659
Optoelectronics 649 (942)
Electronics (189) (673)
Total operating profit 7,208 3,044

 

 

 


 

3.       Earnings per share

 

 

2010

£'000
2009

£'000
Profit attributable to ordinary shareholders 7,506 2,058
Share based payments 1,302 898
Adjusted profit attributable to ordinary shareholders 8,808 2,956
No No
Weighted average number of ordinary shares 461,841,899 436,881,052
Dilutive share options 39,491,923 26,321,661
Adjusted weighted average number of ordinary shares 501,333,822 463,202,713
Adjusted earnings per share 1.91p 0.68p
Basic earnings per share 1.63p 0.47p
Adjusted diluted earnings per share 1.76p 0.64p
Diluted earnings per share 1.50p 0.44p

 

Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.

 

Diluted earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of shares 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 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.

 

 

 

 

 

 

 

4.       Cash generated from operations

          

2010

£'000
2009

£'000
Operating profit 7,208 3,044
Depreciation of tangible assets 3,619 3,372
Amortisation of intangible assets 986 737
Gain on sale of tangible assets (539) (100)
Deferred income (government grants) (44) (39)
Cash costs related to acquisition of subsidiary 80 -
Share based payments 1,302 898
Operating profit before changes in working capital 12,612 7,912
(Increase) in inventories (203) (340)
(Increase) in trade and other receivables (1,968) (2,457)
(Decrease)/increase in trade and other payables (191) 2,597
Net cash inflow from operations 10,250 7,712

 

The net cash inflow from operations for the year ended 31 December 2009 of £7,712,000 is stated after an exceptional cash outflow of £427,000 relating to the restructuring exercise undertaken during the year ended 31 December 2008.

 

 

 


 

5.       Analysis of net funds

At 1

January

2010

£'000
 

Cash

flow

£'000
Other

non-cash

movements

£'000
At 31

December

2010

£'000
Cash and cash equivalents 4,233 8,183 91 12,507
Loans due after one year (12,568) 8,026 3,211 (1,331)
Loans due within one year (6,519) 5,954 (3,468) (4,033)
Finance leases due after one year (23) 23 (78) (78)
Finance leases due within one year (54) 88 (78) (44)
Total borrowings (19,164) 14,091

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