Smartphones and emerging opto markets drive rap...

1 September 2010


IQE plc


IQE plc (AIM: IQE, the "Group"), the leading global supplier of advanced wafer
products and wafer services to the semiconductor industry, announces its Interim
Results for the half year ended 30 June 2010.


FINANCIAL HIGHLIGHTS

 ·     Revenues up 54% to £33.0m (H1 2009: £21.4m)
·     Gross profit up 93% to £7.3m  (H1 2009: £3.8m)
·     EBITDA up 184% to £5.4m (H1 2009: £1.9m)
 ·     Operating profit £2.7m (H1 2009: loss £0.8m)
 ·     Pre tax profit £2.2m (H1 2009: loss £1.4m)
·     £1.9m cash inflow from operations (H1 2009: £0.1m)
·     EPS 0.50 pence (H1 2009: 0.31 pence loss per share)
·     EPS adjusted for share based payments 0.60 pence (H1 2009: 0.23 pence loss
per share)
·     Net debt reduced to £15.6m (H1 2009: £19.0m)

BUSINESS HIGHLIGHTS

·     Strong performance in all main markets: wireless up 52%, optoelectronics
up 55% and electronics up 102%
·     Wireless growth driven by increasing adoption of smartphones; IQE is
designed into the majority of top-tier smartphones by virtue of its broad
customer base and its market share of c.30%
·     Emerging optoelectronic markets accelerating; CPV solar up 100% and VCSELs
for finger navigation and optical USB up 70%
·     Electronics driven by advanced BiCMOS and initial sales of IP rich
advanced substrates (GeOI and SOS)
·     Highly geared business model translates 54% revenue growth into 184%
EBITDA growth
·     Appointment of Adrian Meldrum to the Board, with specific responsibility
for development of the optoelectronics business
·     Continued progress in extending portfolio of intellectual property
including high-speed VCSELs for next-generation optical communications, 6" CPV
solar technology, 4" gallium antimonide substrates and free-standing gallium
nitride substrates
·     Additional patents granted for Nanocolumn technology

Dr Drew Nelson, IQE Chief Executive, said:

"IQE has delivered record results for the first half of 2010 and our strong
operational gearing has turned 54% growth in revenues into a 184% increase in
EBITDA.

"Our focus remains on exploiting our powerful intellectual property to deliver
innovative and high-quality products to rapidly growing markets. The second half
of 2010 has started well with strong demand across our full range of advanced
semiconductor products leading us to have every confidence in both the short
term and long term prospects of the business."


Contacts:

 IQE plc                                  ([phone])

 Drew Nelson

 Phil Rasmussen

 Chris Meadows



 College Hill                             ([phone])

 Adrian Duffield / Carl Franklin



 Execution Noble & Company Limited        ([phone])

 John Llewellyn-Lloyd / Richard Crawley






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'). The world's major chip
manufacturing companies use IQE's wafers to make the leading-edge components
which form the heart of virtually all of today's high-tech devices. IQE is
unique in being able to supply wafers using all of the leading crystal growth
technology platforms and has developed and maintained significant intellectual
property in relation to its products and services.

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. Our technology is an integral part of mobile handsets,
particularly smartphones, wireless infrastructure, Wi-Fi, GPS, and satellite
communications. The unique optoelectronic properties of IQE's materials are also
found  in applications including optical communications, optical connectors,
optical storage, laser printers/copiers,  thermal imaging, leading-edge medical
products, finger navigation devices and ultra high brightness LEDs. IQE's
expertise also extends to a variety of advanced silicon based systems and
high-efficiency concentrator photovoltaic (CPV) solar cells.

The epitaxy production process is complex and highly specialised. As such, chip
manufacturers 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. The Group is also able to lever 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 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.

IQE operates six manufacturing facilities located in Cardiff (two) and Milton
Keynes in the UK; in Bethlehem, Pennsylvania and Somerset, New Jersey in the
USA; and Singapore. The Group also has a dedicated R&D facility in Bath, UK and
operates 11 sales offices located in major economic centres worldwide.


INTERIM RESULTS 2010

1. OVERVIEW

IQE is the world's leading supplier of advanced wafers to the semiconductor
industry with a strategy that focuses on developing and maintaining IP-rich
technologies for high-growth, high-volume markets. The Group has developed a
unique set of competitive advantages to provide its customers with world-leading
epitaxial wafer foundry services. By delivering these advantages both
consistently and globally, and through its strong operational performance, IQE
has become the undisputed leader in its field.

IQE manufactures bespoke compound semiconductor wafers for major chip
manufacturing companies, which use these wafers to make the chips that form the
key components of virtually all high-technology systems. IQE is unique in being
able to offer the industry's broadest product portfolio using the widest range
of production platforms available today.

Products from the Group are found in many existing and emerging consumer,
communication, computing and industrial devices, including mobile handsets,
tablet and personal computers, Wi-Fi, WiMAX, GPS, and satellite receivers and
transmitters. IQE's products also provide the unique optoelectronic properties
used in an increasing number of applications including high-speed
communications, optical storage and finger-navigation components.

Emerging markets for IQE's products include laser projection, optical
connectors, finger navigation, ultra-high-brightness light-emitting diodes (UHB
LEDs) for solid-state lighting (SSL) and high-efficiency concentrator
photovoltaic (CPV) solar cells.


2. RESULTS

Revenues grew by 54% to £33.0m (H1 2009: £21.4m), primarily driven by strong
demand for smartphone products during the first half of the year supported by
accelerating growth in optoelectronic and advanced silicon components.

Gross profits increased by 93% to £7.3m (H1 2009: £3.8m) with gross margins
improving from 17.8% to 22.2%.

Selling, general and administrative expenses were unchanged at £4.6m (H1 2009:
£4.6m) and therefore reduced as a percentage of sales from 22% to 14%.

EBITDA increased by 184% to £5.4m (H1 2009: £1.9), demonstrating IQE's highly
operationally levered business model.

Operating profit increased by £3.5m to £2.7m (H1 2009: £0.8m operating loss),
which after an interest charge of £0.5m (H1 2009: £0.5m) delivered a pre-tax
profit of £2.2m (H1 2009: £1.4m loss)

The Group had no tax charge during the period, reflecting the benefit of the
substantial tax losses at its disposal. These tax losses will enable IQE to
shelter in excess of £100 million of future taxable profits.  Therefore,
retained profit for the period was £2.2m (H1 2009: £1.4m retained loss).

Earnings per share were 0.50p (H1 2009: loss of 0.31p), with adjusted EPS of
0.60p (H1 2009: loss of 0.23p). On a fully diluted basis, adjusted EPS were
0.54p (H1 2009: loss of 0.23p).

Cash inflow from operations increased by £1.8m to £1.9m (H1 2009: £0.1m), even
after the absorption of £3.1m (H1 2009 : £1.7m) into working capital as the
business continued to grow

Net debt stood at £15.6m (H1 2009: £19.0m), representing a year-on-year
reduction of £3.4m.


3. STRATEGY

IQE's strategy remains focused on delivering market leadership in high growth
markets, protected by technology leadership and intellectual property.

IQE has been successful in establishing a clear leadership position in the
high-growth wireless communication market, which currently accounts for 75% of
sales.  Through innovation and technology leadership, IQE is replicating this
success in a number of emerging high-growth markets including VCSEL technology
(for applications such as finger navigation and optical USB), CPV solar
technology, high-efficiency solid-state light sources and advanced lasers (for
applications such as pico projectors and high density optical storage).

IQE's success in the market reflects it focus on its customers' needs.  IQE has
been successful in differentiating its service by developing a powerful set of
USPs, which include:

·     a complete range of IP rich products covering all major applications;
·     global multi-site production capabilities in the primary manufacturing
platforms to allow efficient capacity planning and for disaster scenario
contingency;
·     maintenance of a broad contact base and global presence with access to all
the key global markets;
·     delivery of benefits from economies of scale including purchasing power
and research and development efficiencies;
·     sharing of best practices and innovation across the group to deliver
improved operating and cost efficiencies; and
·     provision of surge capacity to meet the expected growth in demand in the
mobile device sector and other high-volume activities.

This strategy has continued to deliver robust results despite the global
economic downturn and will continue to deliver on current and next-generation
products. In addition, IQE is able to leverage its substantial manufacturing
capacity to deliver tangible benefits to customers, shareholders and other
stakeholders.

4. PRODUCTS

IQE has a well-established track record in developing, protecting and
commercialising its intellectual property and its product roadmap continues to
be driven by trends in four key technology areas, all of which have high-growth,
high-volume prospects:

·     Wireless: The acceleration of the adoption of advanced, high-speed mobile
communications, including 3G, WiFi, GPS and other wireless technologies. As
mobile technologies continue to advance at a rapid pace with new features
constantly emerging, the role of advanced compound-semiconductor materials such
as GaAs has become critical in enabling high-speed data processing, while
maintaining low levels of power consumption. IQE's products are critical in the
drive to 3G and beyond, along with the need for backward network compatibility.
They enable the speed and power to accommodate features such as high-resolution
imaging, video, high-speed wireless data access, VoIP and satellite navigation.
Today's high-speed devices contain many more GaAs components than previous
generations.

·     Opto electronics: Consumer demand for faster and more flexible means of
communication is driving a number of high-growth, high-volume applications that
depend on compound-semiconductor technology.  This includes optical cables (such
as optical USB and Intel's Light Peak), finger navigation for mobile devices,
and laser projection systems.  Optical cables are widely expected to displace
the copper cables used to connect computers, TVs and peripherals.  IQE is the
world leader in VCSEL technology (Vertical Cavity Surface Emitting Laser), which
lies at the heart of optical cables and finger navigation.  Laser projection is
also viewed as one of the most exciting applications of optoelectronic
technology, with first-generation projectors already being incorporated into
mobile handsets and cameras.  VCSEL technology is already beginning to replace
mechanical trackerball designs for finger navigation in mobiles phones.  It is
widely expected that penetration of this technology will grow rapidly.


·     Cleantech: Demand for IQE's products will be driven the move towards
clean, efficient and sustainable energy sources (solar cells), and highly
efficient light sources (LEDs) in order to reduce the impact of global warming,
reliance on fossil fuels and provide a much cleaner environment. Compound
semiconductors are playing a critical role and IQE is involved in leading-edge
development of materials for these applications, including solar-cell
technologies that are achieving record levels of energy conversion.

·     Electronics: The continuing need for higher-speed, more powerful
microprocessors and higher-speed, ultra-high-density memories is driving the
demand for new materials solutions based on silicon substrates including the
incorporation of compound semiconductors directly onto silicon substrates. In
response, IQE has developed a new range of engineered substrates such as
Germanium on Insulator (GeOI) for next-generation integrated circuits and
devices. IQE has established powerful positions in both technologies, working
with some of the biggest names in the industry.

The wireless market currently provides the Group with high-volume sales and the
expectation of continued high growth. However, the other markets are undergoing
rapid development and offer further near-term, high-growth potential and product
diversity.


5. MARKET DEVELOPMENT


IQE's markets fall into the broad categories of wireless, optoelectronics, and
electronics.

Wireless

Wireless products include a wide range of components used for radio frequency
(RF) communications in mobile handsets, smartphones, personal computers, tablet
PCs and a host of other mobile devices.

Mobile technologies are currently used by more than half the world's population,
with industry analysts predicting handset volumes to increase to around 1.3bn in
2010 and 1.6bn by 2013. Growth of smartphones which employ significantly higher
gallium arsenide (GaAs) content than standard handsets, is expected to account
for 19% of all handset sales in 2010, increasing to over 50% by 2014.

Growth in compound semiconductor demand is further driven by new applications
for WiFi such as machine-to-machine, point-to-point and tablet PCs as well as
network operators introducing low-end 3G products to migrate their customers to
3G networks, effectively increasing the compound semiconductor chip content in
low-end handsets.

The compound semiconductor content in smartphones is continuing to grow and
ranges from $2 to $4 in low-end handsets up to $9 in sophisticated high-end
devices.

IQE is in production with all leading wireless chip companies and was recently
awarded "TriQuint's supplier of the year for 2010" based on production support
and development of new products. TriQuint is known to supply the majority of
wireless chips for a number of smartphones including iPhone, Samsung Galaxy, HTC
4G EVO and the Blackberry Tour.

Other customers have significant content in RIM, Samsung and other leading
handset manufacturers with IQE providing BiHEMT wafers for better power
performance and longer battery life.

Wafer inventories remain at low levels throughout the supply chain with no
evidence of inventory build-up.

Optoelectronic

Optoelectronic components cover a broad range of applications including data
communications, consumer applications, solid state lighting and CPV solar cells.

Optical fibre communications have been used for many years for long-haul voice
and data communications. Today's PCs and peripheral devices are increasingly
data hungry to the extent that communications between such devices require the
same capacity that just 10 years ago would have been sufficient to carry over
one million voice calls across the Atlantic. Over the next four years, optical
cables are predicted to replace copper cables for interconnecting a wide range
of devices. Demand for semiconductor lasers (VCSELs) is anticipated to grow from
around 1m units in 2009 to over 650m units in 2014.

In addition to optical communications, VCSELs are beginning to be deployed as
finger-navigation devices by a number of leading handset manufacturers such as
RIM, LG, Samsung, Sony Ericsson and HTC.

Data storage devices (from CDs to Blu-ray discs) utilise lasers and optical
detectors made using semiconductor wafer products. The storage capacity of a
digital recording disc is determined by the wavelength (colour) of light emitted
by the read/record laser with audio/data CDs operating at the red end of the
spectrum and Blu-ray at the blue end. Modern devices such as Blu-ray HD video
and games consoles employ multiple laser components to allow backward
compatibility. Shipments of Blu-ray optical storage devices are expected to grow
from 40m units in 2009 to over 200m units in 2012.

Red green and blue lasers are also used to generate images in an emerging range
of pico projectors. It is anticipated that pico projectors will become
commonplace within handset and tablet PCs within the next five years in the same
way that cameras have become during the last five years.

The drive for sustainable generation of electricity is expected to yield a mix
of alternative power options over the coming years within which solar energy is
likely to emerge as a key source of renewable energy. IQE's technology provides
the material for the most efficient and cost effective solar cells for power
generation in the form of CPV solar cells. Industry analysts estimate that less
than 0.5% of current electricity is generated by solar power but predict that
this will increase to 64% in 2100. IQE is uniquely positioned as high-efficiency
solar power emerges over the coming years.

Closely linked with sustainable power generation is the move towards high
efficiency lighting which also uses IQE's wafer technology. Over 20% of the
world's energy consumption is taken up by lighting. A key driver for the
adoption of alternative lighting technology will be the almost universal banning
of incandescent lighting technology from 2012. LED Solid State Lighting is
emerging as the major technology to displace existing lighting, which dates back
over a century. The market for ultra-high brightness LEDs is expected to grow
from less than $2Bn in 2009 to over $4Bn by 2012.

Electronics
The ever-increasing demand for higher speed and improved performance from
today's electronic devices is ushering in a new era of semiconductor materials
that combine the versatility of silicon, which has been the default
semiconductor material for the last half century, with the power and performance
of compound semiconductors that have emerged as true 21(st) century materials.


6. TRADING OUTLOOK


Growth in demand for IQE's products during the first half of 2010 was largely
driven by the increasing demand for wireless components used in smartphone and
tablet PC technologies, which contain a significantly higher content of gallium
arsenide (GaAs) products than previous generations of handheld devices.

Smartphones represent a fundamental structural shift in mobile communications
and will still only account for 19% of the total handset marketplace in 2010.
The Group sees the annual growth rate of 30-40% continuing for several years to
come. In addition, the proliferation of wireless applications such as with smart
meters and point to point communications will add further demand for IQE's
wireless products.

Demand for wireless products is strongly supported by accelerating growth in
demand for optoelectronic devices across a range of exciting new technologies
and applications, including finger navigation, short range data communications,
lasers for projection, high efficiency LEDs and CPV materials for advanced solar
energy generation.

Significant growth is also occurring in IQE's silicon based product division
with the adoption of new engineered substrates launched in 2009 such as
Germanium on Insulator (GeOI) and Silicon on Sapphire (SOS) for next-generation
integrated circuits and high speed devices.

The second half has begun well, with sales now anticipated to be ahead of
expectations as a result of a strong performance across all of the Group's
product ranges. The continued successful implementation of the Group's strategy
combined with strong operational performance give the Board every confidence in
both the short term and long term prospects of the business.


Dr Drew Nelson
CEO






                                          6 months to 6 months to 12 months to

CONSOLIDATED INCOME                       30 Jun 2010 30 Jun 2009  31 Dec 2009
STATEMENT



(All figures £'000s)            Note        Unaudited   Unaudited      Audited



Revenue                                        33,017      21,421       52,652

Cost of sales                                (25,684)    (17,614)     (41,073)

Gross profit                                    7,333       3,807       11,579

Selling, general and                          (4,643)     (4,640)      (8,535)
administrative expenses

Operating profit / (loss)                       2,690       (833)        3,044

Finance costs                                   (489)       (528)        (986)

Profit / (loss) attributable to equity          2,201     (1,361)        2,058
shareholders



Adjusted earnings / (loss)       3              0.60p     (0.23p)        0.68p
per share

Earnings / (loss) per            3              0.50p     (0.31p)        0.47p
share



Adjusted diluted earnings        3              0.54p     (0.23p)        0.64p
/ (loss) per share

Diluted earnings / (loss)        3              0.44p     (0.31p)        0.44p
per share





Earnings before interest, tax, depreciation and amortisation (EBITDA) have
been calculated as follows:



Profit / (loss) attributable to equity          2,201     (1,361)        2,058
shareholders

Share based payments                              488         359          898

Net interest payable                              489         528          986

Depreciation of tangible                        1,891       2,045        3,372
fixed assets

Amortisation of intangible fixed assets           348         338          737

EBITDA                                          5,417       1,909        8,051









CONSOLIDATED STATEMENT OF                  6 months to 6 months to  12 months to

COMPREHENSIVE                              30 Jun 2010 30 Jun 2009   31 Dec 2009
INCOME/(EXPENSE)



(All figures £'000s)                         Unaudited   Unaudited       Audited

Profit / (loss)                                  2,201     (1,361)         2,058
attributable to equity
shareholders

Cash flow hedges                                 (203)         213             -

Revaluation gain of initial investment on            -           -            28
acquisition

Currency translation differences on              1,725     (4,483)       (3,859)
foreign currency net investments

Total comprehensive income/(expenses) for        3,723     (5,631)       (1,773)
the period








                                            As At         As At         As At

 CONSOLIDATED BALANCE SHEET           30 Jun 2010   30 Jun 2009   31 Dec 2009



 (All figures £'000s)                   Unaudited     Unaudited       Audited



 Non-current assets :

 Intangible assets                         21,200        14,348        19,182

 Property, plant and equipment             20,852        21,469        21,365

 Total non-current assets                  42,052        35,817        40,547



 Current assets :

 Inventories                               10,879        10,291        10,789

 Trade and other receivables               16,514        10,835        13,261

 Cash and cash equivalents                  1,394             -         4,233

 Total current assets                      28,787        21,126        28,283

 Total assets                              70,839        56,943        68,830



 Current liabilities :

 Borrowings                              (13,612)      (10,937)       (6,573)

 Trade and other payables                (16,748)      (12,903)      (16,770)

 Total current liabilities               (30,360)      (23,840)      (23,343)



 Non-current liabilities :

 Borrowings                               (3,343)       (8,059)      (12,591)

 Deferred consideration                   (3,014)             -       (3,014)

 Deferred income                             (26)          (64)          (45)

 Total non-current liabilities            (6,383)       (8,123)      (15,650)

 Total liabilities                       (36,743)      (31,963)      (38,993)

 Net assets                                34,096        24,980        29,837



 Shareholders' equity :

 Ordinary shares                            4,457         4,361         4,435

 Share premium                              1,458           336         1,150

 Profit and loss account                   22,714        14,338        20,513

 Other reserves                             5,467         5,945         3,739

 Total shareholders' equity                34,096        24,980        29,837











                                            6 months to 6 months to 12 months to

CONSOLIDATED CASH FLOW STATEMENT            30 Jun 2010 30 Jun 2009  31 Dec 2009



(All figures                                  Unaudited   Unaudited      Audited
£'000s)



Cash flows from operating activities :

Cash inflow from operations              5        1,891          95        7,712

Net interest paid                                 (553)       (559)      (1,099)

Net cash inflow/(outflow) from operating          1,338       (464)        6,613
activities



Cash flows from investing activities :

Acquisition of NanoGaN Limited                        -           -        (205)

Development expenditure                         (1,739)       (916)      (2,325)

Investment in other intangible fixed assets       (171)           -        (248)

Purchase of property, plant and equipment       (1,161)       (916)      (1,660)

Proceeds from sale of tangible fixed assets       1,551           -            -

Net cash used in investing activities           (1,520)     (1,832)      (4,438)



Cash flows from financing activities :

Issues of ordinary share capital                     37         240          596

Loans and leases (repaid)/received              (2,738)       (244)        2,778

Net cash (used in)/generated from financing     (2,701)         (4)        3,374
activities

Net (decrease)/increase in cash and cash        (2,883)     (2,300)        5,549
equivalents



Cash and cash equivalents at the beginning        4,233       (928)        (928)
 of the period

Exchange gains/(losses) on cash and                  44           -        (388)
bank overdrafts

Cash and cash equivalents at the end of  6        1,394     (3,228)        4,233
the period












1 BASIS OF PREPARATION

These interim results have been prepared under the historical cost convention
and in accordance with International Financial Reporting Standards ("IFRS") and
interpretations in issue at 30 June 2010.

The interim results were approved by the Board of Directors and the Audit
Committee on 31 August 2010. The interim results do not constitute statutory
accounts within the meaning of the Companies Act 2006 and have not been
audited.  Comparative figures in the interim results for the year ended 31
December 2009 have been taken from the published audited statutory financial
statements.  All other periods presented are unaudited.







                                6 months to 6 months to 12 months to

2 SEGMENTAL INFORMATION         30 Jun 2010 30 Jun 2009  31 Dec 2009



(All figures £'000s)              Unaudited   Unaudited      Audited



Revenue by business segment
:

Wireless                             24,795      16,289       41,598

Optoelectronics                       7,134       4,593        9,843

Electronics                           1,088         539        1,211

Total revenue                        33,017      21,421       52,652



EBITDA by business segment:

Wireless                              4,710       2,047        8,359

Optoelectronics                         704        (92)         (46)

Electronics                               3        (46)        (262)

Total EBITDA                          5,417       1,909        8,051



Operating profit/(loss) by business segment:

Wireless                              2,558       (201)        4,659

Optoelectronics                         281       (437)        (942)

Electronics                           (149)       (195)        (673)

Total operating profit/(loss)         2,690       (833)        3,044









3  EARNINGS PER SHARE                       6 months to 6 months to 12 months to

                                            30 Jun 2010 30 Jun 2009  31 Dec 2009



                                              Unaudited   Unaudited      Audited



Results in £'000s:

Profit/(loss) attributable to ordinary            2,201     (1,361)        2,058
shareholders

Share based payments                                488         359          898

Adjusted profit/(loss) attributable to            2,689     (1,002)        2,956
ordinary shareholders



Number of shares:

Weighted average number of ordinary shares  444,585,171 434,131,613  436,881,052

Dilutive share options                       55,432,916           -   26,321,661

Adjusted weighted average number of         500,018,087 434,131,613  463,202,713
ordinary shares



Adjusted earnings/(loss) per share                0.60p     (0.23p)        0.68p

Basic earnings/(loss) per share                   0.50p     (0.31p)        0.47p



Adjusted diluted earnings/(loss) per share        0.54p     (0.23p)        0.64p

Diluted earnings/(loss) per share                 0.44p     (0.31p)        0.44p



Basic earnings per share is calculated by dividing the profit attributable to
ordinary shareholders by the weighted average number of ordinary shares during
the period.  Adjusted earnings per share is calculated by adding back the charge
for share based payments since the directors believe that this provides a fairer
reflection of the group's earnings.

Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares in issue on the assumption of conversion of all
potential ordinary shares. Share options are only considered to be dilutive if
they are 'in the money' i.e. that they can result in the purchase of ordinary
shares for less than the average mid market share price in the period (6 months
to 30 June 2010: 17.69p; 12 months to 31 December 2009: 10.84p).

The group incurred losses in the 6 months to 30 June 2009 and, as such, options
and warrants that may be converted were considered anti dilutive, since they
would reduce the loss per share.





4 STATEMENT OF CHANGES IN                   6 months to 6 months to 12 months to

  SHAREHOLDERS' EQUITY                      30 Jun 2010 30 Jun 2009  31 Dec 2009



(All figures £'000s)                          Unaudited   Unaudited      Audited



Profit / (loss) attributable to equity            2,201     (1,361)        2,058
shareholders

Cash flow hedges                                  (203)         213            -

Revaluation of initial investment on                  -           -           28
acquisition

Net exchange differences offset in reserves       1,725     (4,483)      (3,859)

Total comprehensive income/(expense)              3,723     (5,631)      (1,773)



Employee share option scheme                        536         393          625

Shares issued for business combination                -           -          767

Total transactions with owners                      536         393        1,392



Shareholders' equity at start of period          29,837      30,218       30,218

Shareholders' equity at end of period            34,096      24,980       29,837



                                            6 months to 6 months to 12 months to

5 CASH GENERATED FROM OPERATIONS            30 Jun 2010 30 Jun 2009  31 Dec 2009



(All figures £'000s)                          Unaudited   Unaudited      Audited



Operating profit/(loss)                           2,690       (833)        3,044



Depreciation of tangible assets                   1,891       2,045        3,372

Amortisation of intangible assets                   348         338          737

Gain on sale of tangible assets                   (447)       (103)        (100)

Government grants released                         (19)        (19)         (39)

Non cash share based payment costs                  488         359          898

Cash from operations before changes in            4,951       1,787        7,912
working capital



Decrease/(increase) in inventories                  422       (132)        (340)

(Increase)/decrease in trade and other          (2,378)       (581)      (2,457)
receivables

(Decrease)/increase in trade and other          (1,104)       (979)        2,597
payables

Cash inflow generated from operations             1,891          95        7,712






                                         As At       As At       As At

6 ANALYSIS OF NET DEBT             30 Jun 2010 30 Jun 2009 31 Dec 2009



(All figures £'000s)                 Unaudited   Unaudited     Audited



Cash and cash                            1,394     (3,228)       4,233
equivalents/(overdraft)



Loans due after one year               (3,329)     (8,016)    (12,568)

Loans due within one year             (13,552)     (7,653)     (6,519)

Finance leases due after one year         (14)        (43)        (23)

Finance leases due within one year        (60)        (56)        (54)

Total borrowings                      (16,955)    (15,768)    (19,164)

Net                                   (15,561)    (18,996)    (14,931)
debt











[HUG#1441797]








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