2010 Full Year Results
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 buoyant end 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 representing 22% 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 efficient safer 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 -Â 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 emissions can 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
H2 2010 H2 2009 2010 2009
  £'000 £'000 £'000 £'000
Note
unaudited unaudited audited 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  (4,749) (3,895) (9,392) (8,535)
expenses
--------------------------------------------------------------------------------
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  5,305 3,419 7,506 2,058
equity shareholders
--------------------------------------------------------------------------------
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 2009
£'000 £'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 Â Â 13,115 8,051
------------------------------------------------------------------------------
EBITDA was generated during the period as follows:
H1 EBITDA (unaudited) Â Â 5,417 1,909
H2 EBITDA (unaudited) Â Â 7,698 6,142
------------------------------------------------------------------------------
Full year EBITDA (audited) Â Â 13,115 8,051
------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2010
2010 2009
£'000 £'000
--------------------------------------------------------------------------------
Profit/(loss) for the period  7,506 2,058
Currency translation differences on foreign currency net  3,095 (3,859)
investments
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 Share Retained Exchange Other Total
capital premium earnings rate reserves equity
reserve
 £'000 £'000 £'000 £'000 £'000 £'000
--------------------------------------------------------------------------------
Balance at 1 4,435 1,150 20,513 1,745 1,994 29,837
January 2010
--------------------------------------------------------------------------------
Comprehensive
income
Profit for the - - 7,506 - - 7,506
period
Foreign exchange - - - 3,095 - 3,095
translation
differences
Cash flow hedges - - - - 116 116
--------------------------------------------------------------------------------
Total - - 7,506 3,095 116 10,717
comprehensive
income
Transactions
with owners
Employee share - - - - 446 446
option scheme
Share placing 650 19,226 - - - 19,876
Other issues of 68 861 - - 469 1,398
ordinary shares
--------------------------------------------------------------------------------
Total 718 20,087 - - 915 21,720
transactions
with owners
--------------------------------------------------------------------------------
Balance at 31 5,153 21,237 28,019 4,840 3,025 62,274
December 2010
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Balance at 1 4,333 124 18,455 5,604 1,702 30,218
January 2009
--------------------------------------------------------------------------------
Comprehensive
income
Profit for the - - 2,058 - - 2,058
period
Foreign exchange - - - (3,859) - (3,859)
translation
differences
Revaluation gain - - - - 28 28
on business
combination
--------------------------------------------------------------------------------
Total - - 2,058 (3,859) 28 (1,773)
comprehensive
income
Transactions
with owners
Employee share - - - - 264 264
option scheme
Shares issued 58 709 - - - 767
for business
combination
Other issues of 44 317 - - - 361
ordinary shares
--------------------------------------------------------------------------------
Total 102 1,026 - - 264 1,392
transactions
with owners
--------------------------------------------------------------------------------
Balance at 31 4,435 1,150 20,513 1,745 1,994 29,837
December 2009
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
as at 31 December 2010
  2009
2010
 Note £'000
£'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 Â 12,507 4,233
----------------------------------------------------------------
Total current assets   40,851 28,283
----------------------------------------------------------------
Total assets   96,124 68,122
----------------------------------------------------------------
Current liabilities:
Borrowings 5 Â (4,077) (6,573)
Trade and other payables   (20,073) (16,770)
----------------------------------------------------------------
Total current liabilities   (24,150) (23,343)
----------------------------------------------------------------
Non-current liabilities:
Borrowings 5 Â (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
 H2 2010 H2 2009 2010 2009
 Note £'000 £'000 £'000 £'000
unaudited unaudited audited 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  8,369 7,077 9,707 6,613
activities
--------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of NanoGaN Limited  - (205) - (205)
Acquisition of Galaxy Compound 1 - 1 -
Semiconductors, Inc
Development expenditure  (1,640) (1,409) (3,379) (2,325)
Investment in other intangible fixed  (218) (248) (389) (248)
assets
Purchase of property, plant and  (3,918) (744) (4,995) (1,660)
equipment
Proceeds from sale of property, plant and - - 1,467 -
equipment
--------------------------------------------------------------------------------
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  8,472 3,378 5,771 3,374
activities
--------------------------------------------------------------------------------
Net increase in cash and cash equivalents 11,066 7,849 8,183 5,549
Cash and cash equivalents at 1 Â Â Â 4,233 (928)
January
Exchange losses on cash and cash    91 (388)
equivalents
--------------------------------------------------------------------------------
Cash and cash equivalents at 31 5 Â Â 12,507 4,233
December
--------------------------------------------------------------------------------
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 2009
£'000 £'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 2009
 £'000 £'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 2009
 £'000 £'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  Other At 31
January Cash non-cash December
2010 flow movements 2010
£'000 £'000 £'000 £'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 (413) (5,486)
-------------------------------------------------------------------------------
Net funds/(debt) (14,931) 22,274 (322) 7,021
-------------------------------------------------------------------------------
Cash and cash equivalents at 31 December 2010 comprised balances held in instant
access bank accounts.
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: IQE plc via Thomson Reuters ONE
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