Final Results - Part 2
IQE PLC
21 March 2001
PART 2
IQE plc
Quarter Four and Full Year 2000 Results
Record Sales, Profits and Orders
IQE PLC
3 3 12 12
months months months months
PROFIT AND LOSS ACCOUNT 31 Dec 31 Dec note 31 Dec 31 Dec
2000 1999 2000 1999
(All figures GBP000s)
Sales 10,478 5,068 30,117 19,043
Cost of Sales (6,826) (3,295) (19,785)(12,558)
Gross Profit 3,652 1,773 10,332 6,485
Gross Profit % 34.9 35.0 34.3 34.1
S G and A Costs
Research/Development (457) (309) (1,870) (1,302)
Selling/General/Admin (2,291) (1,152) (6,392) (3,729)
Selling/General/Admin 105 (0) 2 (75) (171)
Exceptional
Operating Profit/(Loss) 1,008 312 1,995 1,283
before Goodwill
Operating Profit/(Loss) % 9.6 6.2 6.6 6.7
Interest
Interest Received/(Paid) 589 (46) 1,208 (261)
Interest Received/(Paid) (0) 0 (0) (328)
Exceptional
Goodwill written off (209) (0) (209) (0)
Net Profit/(Loss) before 1,388 266 2,994 694
Taxes/Exceptionals
Net Profit/(Loss) % 13.2 5.2 9.9 3.6
Current Taxes 555 214 3 75 13
Deferred Taxes (1,259) (4) 3 (1,259) 135
Dividend (0) (0) (0) (0)
Net Profit/(Loss) after 684 476 1,810 843
Taxes/Exceptionals
Basic Earnings Pence/Share 1.24 0.63
Basic Earnings Pence/Share 1.38 0.63
excl Goodwill
Diluted Earnings 1.18 0.59
Pence/Share
Diluted Earnings 1.32 0.59
Pence/Share excl Goodwill
Net Profit/(Loss) before
Interest/Taxes/
Depreciation and 2,024 789 4,832 2,793
Amortization (EBITDA)
Sales from New Acquisitions 989 0 989 0
Operating Profit/(Loss) 283 0 283 0
from New Acquisitions
As At As At
BALANCE SHEET note 31 Dec 31 Dec
2000 1999
(All figures GBP000s)
Fixed Assets
Intangible Fixed Assets 4 36,542 0
Tangible Fixed Assets 47,848 11,483
Total Fixed Assets 84,390 11,483
Current Assets
Stocks 7,885 2,573
Debtors 10,311 7,742
Cash and Bank 39,512 8,117
Total Current Assets 57,708 18,432
Creditors Falling Due (17,406) (4,517)
within One Year
Net Current Assets 40,302 13,914
Total Assets less Current 124,693 25,397
Liabilities
Creditors Falling Due
after One Year
Deferred Income (69) (93)
Deferred Tax Liability (1,590) (331)
Long Term Borrowings (5,438) (4,024)
Net Assets 117,596 20,949
Capital and Reserves
Called Up Share Capital 1,633 1,360
Merger Reserve (605) (605)
Share Premium Account 111,802 18,907
Shares to be Issued 988 0
Retained Earnings 3,090 1,281
Other Reserves 688 7
Total Equity Shareholders' 117,596 20,949
Funds
The financial statements
were approved by the Directors of IQE plc on 20 March 2001
JL COVENTRY
Company Secretary
3 3 12 12
months months Months Months
CASH FLOW STATEMENT 31 Dec 31 Dec note 31 Dec 31 Dec
2000 1999 2000 1999
(All figures GBP000s)
Net Inflow/(Outflow) from 4,492 (4,036) 10,949 (2,877)
Operations
Returns on Investment and
Servicing Finance
Interest 589 (46) 1,208 (589)
Received/(Paid)
Capital Expenditures
Purchases of Fixed (13,820) 187 (33,566) (7,413)
Assets
Investment in (13,968) 0 (13,968) 0
Subsidiaries less Cash
Equity Dividends Paid (0) (0) (0) (0)
Taxes Paid (110) (56) (144) (282)
Net Inflow/(Outflow) (22,817) (3,950) (35,520) (11,160)
before Financing
Financing
Issues of Ordinary (23) (13) 67,356 19,381
Share Capital
Loans Received/(Repaid) (151) 341 (441) (444)
Net Inflow/(Outflow) from (174) 328 66,915 18,937
Financing
Increase/(Decrease) in
Cash and
Bank Overdrafts (22,991) (3,623) 31,395 7,776
RECONCILIATION OF PROFIT 12 12
TO Months Months
CASH INFLOW FROM OPERATIONS note 31 Dec 31 Dec
2000 1999
(All figures GBP000s)
Operating Profit 1,786 1,283
Depreciation 2,839 1,509
Goodwill 209 0
Loss on Sale of Fixed 29 0
Assets
(Increase)/Decrease in (4,013) (982)
Stocks
(Increase)/Decrease in (1,157) (4,852)
Debtors
Increase/(Decrease) in 11,280 81
Creditors
Grants Released (24) (29)
Grants Received 0 112
Net Cash Inflow/(Outflow) 10,949 (2,877)
from Operations
RECONCILIATION OF NET CASH FLOW 12 12
Months Months
TO MOVEMENT IN NET FUNDS note 31 Dec 31 Dec
2000 1999
(All figures GBP000s)
Increase/(Decrease) in 31,395 7,776
Cash
Loans
Loans Repaid 441 3,611
Loans Received (0) (2,908)
Change in Funds Resulting 31,836 8,479
from Cash Flows
New Finance Leases (2,590) (124)
Net Movement 29,246 8,355
Net Funds at Start 3,572 (4,648)
Exchange Differences (5) (135)
Net Funds at Close 32,813 3,572
Analysis of Net Funds
Cash and Bank 39,512 8,117
Debt Due after One year (3,526) (3,943)
Debt Due within One year (508) (504)
Finance Leases (2,664) (99)
Total 32,813 3,572
3 3 12 12
Months Months Months Months
RECONCILIATION OF UKGAAP TO 31 Dec 31 Dec note 31 Dec 31 Dec
IAS 2000 1999 2000 1999
(All figures GBP000s)
(1) Statement of Cash Flows
The following shows the
statement of cashflows as if
they had been
presented under IAS
Cash Inflow/(Outflow) from 3,192 (4,961) 10,383 (4,076)
Operations
Cash Inflow/(Outflow) from (26,158) 514 (45,904) (7,086)
Investing
Cash Inflow/(Outflow) from 7 826 66,916 18,938
Financing
Net Increase/(Decrease) in
Cash and Cash Equivalents (22,959)(3,621) 31,395 7,776
Opening Cash and Cash 62,503 11,740 8,117 341
Equivalents per IAS
Exchange Difference (31) (2) 0 0
Closing Cash and Cash 39,513 8,117 39,512 8,117
Equivalents per IAS
(2) Goodwill
Goodwill of £284,000 arose
on acquisition of IQE
(Europe) by EPIH on 27 March
1996. Under UK GAAP, this
has been written off
directly to reserves.
Under IAS, however,
goodwill arising on
acquisition should be
recognized as an asset and
amortized over its useful
life. The following shows
the retained
profit and total net assets
as if they had been prepared
under IAS with goodwill
amortized over 5 years.
Profit/(Loss) after Taxes 684 476 1,810 843
and Exceptionals
Dividends (0) (0) (0) (0)
Retained Profit/(Loss) per 684 476 1,810 843
UK GAAP
Goodwill Amortization (14) (14) (57) (57)
Retained Profit/(Loss) per 670 462 1,753 786
IAS
Equity Shareholders' Funds 27,248 613 117,596 20,949
per UK GAAP
Goodwill Capitalization at 0 0 284 284
Cost
Accumulated Goodwill (14) (14) (270) (213)
Amortization
Equity Shareholders' Funds 27,234 599 117,610 21,020
per IAS
NOTES TO THE ACCOUNTS
1 BASIS OF PREPARATION
The financial statements are prepared in accordance with
applicable accounting standards under UK GAAP.
The particular accounting policies adopted are described below :
*The financial information is prepared under the historical
cost convention and in accordance with applicable accounting
standards, which have been applied on a consistent basis
during the year under review.
*Turnover represents amounts invoiced exclusive of value added
taxation.
Tangible fixed assets are stated at cost less accumulated
depreciation. Cost comprises all costs that are directly
attributable to bringing the asset into working condition for
its intended use, as defined by Financial Reporting Standard
Number 15. Depreciation has been calculated so as to write
down the cost of assets to their residual values over the
following estimated useful economic lives :
Freehold buildings 25 years
Short leasehold improvements 5/27 years
Plant and machinery 4/5 years
Fixtures and fittings 4/5 years
Motor vehicles 4 years
No depreciation is provided on land or assets in the
course of construction.
*The financial information consolidates the financial
statements of the Company and all of its subsidiaries.
The acquisition of IQE (Europe) Limited (formerly known as
Epitaxial Products International Limited) and its subsidiary
Epitaxial Products Inc on 27 March 1996 by EPI Holdings
Limited, a new company established for that purpose,
has been accounted for under acquisition accounting,
whereby these Companies became part of the Group on the
date of acquisition.
The acquisition of EPI Holdings Limited and IQE Inc (formerly
Quantum Epitaxial Designs Inc) on 16 May 1999 by IQE plc, a new
holding company established for that purpose, has been
accounted for under merger accounting, whereby the financial
information is disclosed as if the companies had always been
part of the same Group.
The acquisition of Wafer Technology International Limited and
its subsidiary Wafer Technology Limited on 22 November 2000 by
IQE plc has been accounted for under acquisition accounting,
whereby these companies became part of the Group on the date
of acquisition.
On the acquisition of a business, fair values are attributed
to the Group's share of the net tangible assets acquired.
Where the cost of the acquisition exceeds the values
attributable to such net assets, the difference is treated as
purchased goodwill. The goodwill arising on the acquisition
of IQE (Europe) Limited (formerly Epitaxial Products
International Limited) and its subsidiary Epitaxial Products
Inc by EPI Holdings Limited was written off directly to
reserves in the year of acquisition. Goodwill of £284,000
remains eliminated in the profit and loss reserve and will be
charged to the profit and loss acount on the subsequent
disposal of IQE (Europe) Limited and Epitaxial Products Inc.
Following the issue of Financial Reporting Standard 10,
goodwill arising in accounting periods ending on or after 23
December 1998 must be classified as an asset on the balance
sheet and amortized over its useful life
The goodwill arising on the acquisition of Wafer Technology
International Limited and its subsidiary Wafer Technology
Limited has been capitalized and is being amortized over its
useful life, which is considered by the Directors to be 20
years.
Stocks are stated at the lower of cost and net realizable
value.
Research and development expenditure is fully written off when
incurred.
Transactions in foreign currencies during the year are
recorded in sterling at the rates ruling at the dates of the
transactions. Monetary assets and liabilities in foreign
currencies are translated into sterling at the rates ruling at
the balance sheet date. All exchange differences are taken
to the profit and loss account.
The balance sheets of IQE Inc (formerly Quantum Epitaxial
Designs Inc) are translated into sterling at the closing rates
of exchange for the year, while the profit and loss accounts
are translated into sterling at the average rates of exchange
for the year. The resulting translation differences are
taken direct to reserves.
The Group operates a defined contribution pension scheme.
Contributions are charged in the profit and loss account as
they become payable in accordance with the rules of the
scheme.
Deferred taxation is provided on timing differences, arising
from the different treatment of items for accounting and
taxation purposes, which are expected to reverse in the future
without replacement, calculated at the rates at which it is
expected that will arise.
Government grants receivable in connection with expenditure on
tangible fixed assets are accounted for as deferred income,
which is credited to the profit and loss account by
instalments over the expected useful economic life of the
related assets on a basis consistent with the depreciation
policy.
Revenue grants for the reimbursement of costs incurred are
deducted from the costs to which they related, in the year in
which the costs are incurred.
Assets held under finance leases and hire purchase contracts
are capitalized at their fair value on the inception of the
leases and depreciated over the shorter of the period of the
lease and the estimated useful economic lives of the assets.
The finance charges are allocated over the period of the lease
in proportion to the capital amount outstanding and are
charged to the profit and loss account.
Operating lease rentals are charged to the profit and loss
account in equal amounts over the lease term.
The only derivative instruments utilized by the Group are
forward exchange contracts. The Group does not enter into
speculative derivative contracts. Forward exchange contracts
are used for hedging purposes to alter the risk profile of an
existing underlying exposure of the Group in line with the
Group's risk management policies.
2 EXCEPTIONAL ITEMS
Exceptional items comprise:
Merger costs £0K (1999 : £171K)
Provision for national insurance
contributions on share options £75K(1999: £0K)
3TAXATION
The effective tax rate for the Group is 40% (1999: tax credit).
This high rate was due to unrelieved taxlosses arising in the US
operations.
4 INTANGIBLE FIXED ASSETS
100% of the issued share capital of Wafer Technology Limited
and Wafer Technology International Limited was acquired on 22
November 2000 for a consideration of £41,301K. This has been
accountedfor using the acquisition method of accounting.
5 SHARE OPTIONS
The number of outstanding share options at 31
December 2000 was : 9,578082 (1999:10,380,990)
6 CAPITAL COMMITMENTS
The value of capital commitments at 31 December
2000 was : £16,690K (1999 :£14,653K)
7 AUDIT
The financial information set out in the announcement does
not constitute the Company's statutory accounts for
the years ended 31 December 1999 and 31 December 2000.
The financial information for the year ended 1999 is
derived from the statutory accounts for that year
which have been delivered to the Registrar of Companies.
The auditors reported on those accounts ; their report
was unqualified and did not contain a statement under
s237(2) or (3) of theCompanies Act 1985.
The statutory accounts for the year ended 31 December 2000
will be finalized on the basis of the financial
information presented by the Directors in this preliminary
announcement, and will be delivered to the Registrar of
Companies following the Company's Annual General Meeting.
The accounts for the quarter ended 31 December 2000 have
not been audited.