TIDMIQE
RNS Number : 7835Z
IQE PLC
17 May 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
IQE plc
("IQE" or the "Group")
Unaudited Preliminary Results for the Full Year ended 31
December 2022
Cardiff, UK
17 May 2023
Resilient performance and strategic progress against a
challenging industry backdrop
IQE plc (AIM: IQE, "IQE" or the "Group"), a leading supplier of
compound semiconductor wafer products and advanced material
solutions to the global semiconductor industry , today provides
unaudited preliminary results in relation to the full year ended 31
December 2022.
FY 2022 Financial highlights
FY 2022 FY 2021 Change Constant
GBP'm* GBP'm* (%) currency
change
(%)
Revenue 167.5 154.1 9% (2%)
Adjusted EBITDA 23.4 18.7 25%
Adjusted EBIT (3.6) (6.5)
Reported EBIT(1) (73.0) (20.0)
Reported loss before tax(2) (75.4) (22.2)
Adjusted net cashflow from
operations 15.7 17.9 (12%)
Reported net cashflow from
operations 8.9 18.9 (53%)
Capital expenditure(3) (9.4) (15.1) (37)%
Adjusted net debt(4) (15.2) (5.8)
Reported net debt (66.5) (60.2)
Cash and cash equivalents 11.6 10.8
Diluted EPS (9.27p) (3.87p)
Adjusted Diluted EPS (0.74p) (2.41p)
Note: FY22 financials are unaudited
1. Reported figures include a GBP62.7m non-cash goodwill
impairment
2. Adjustments include impairment of intangible assets,
restructuring costs, CEO recruitment costs and share-based payment
charges.
3. Capex stated is Property, Plant and Equipment cash capex.
4. Adjusted net debt is calculated as cash less borrowings but
excluding lease liabilities and fair value gains/losses on
derivative instruments.
Group revenue for FY 2022 was up 9% to GBP167.5m (FY 2021:
GBP154.1m). On a constant currency basis, Group revenue was
GBP151.2m (FY 2021: GBP154.1m).
Wireless revenue of GBP76.0m (FY 2021: GBP83.2m) was down 9%
year-on-year on a reported basis and down 18% on a constant
currency basis. This decrease reflects a decline in wireless GaAs
epiwafer sales and the impact of the closure of the Group's
manufacturing facility in Singapore focused on the manufacture and
sale of legacy pHEMT epiwafers. The reduction in wireless GaAs
epiwafer sales in particular has been impacted by softness in the
broader smartphone handset market which has led to increased
inventory levels throughout the manufacturing supply chain. This
has continued to adversely affect demand for wireless GaAs
epiwafers in H1 2023.
Photonics revenue of GBP88.7m (FY 2021: GBP68.1m) was up 30%
year-on-year on a reported basis and up 18% on a constant currency
basis. This increase reflects the continued strength of demand for
VCSELs used in 3D sensing. The Group has benefitted from increased
customer diversification following the announcement of a new
multi-year strategic agreement with a global consumer electronics
leader in early Q4 2022, and higher other Photonics product sales
driven by a combination of factors including the re-phasing of
certain aerospace and security orders.
CMOS++ revenue of GBP2.8m (FY 2021: GBP2.8m) was flat
year-on-year and down 9% on a constant currency basis.
Group adjusted EBITDA of GBP23.4m (FY 2021: GBP18.7m). Adjusted
EBITDA margin of 14% (FY 2021: 12%) as costs were controlled in
line with the Group's efficiency objectives.
Reported operating loss of GBP73.0m (FY 2021: (GBP20.0m))
primarily due to the non-cash impairment of goodwill of GBP62.7m
(see below), with an adjusted operating loss of GBP3.6m (FY 2021:
GBP6.5m).
Reported net cashflow from operations of GBP8.9m (FY 2021:
GBP18.9m) reflecting cash generated through the Group's resilient
trading performance offset by adverse working capital movements and
the cash impact of adjusted non-operational items.
Adjusted net debt position (excluding lease liabilities) of
GBP15.2m as at 31 December 2022 (FY 2021: net debt of GBP5.8m).
Capital expenditure of GBP9.4m on PP&E (FY 2021: GBP15.1m)
to support future growth opportunities. The Group continues to
invest in research and development with capitalised technology
development of GBP3.8m (FY 2021: GBP3.0m).
Impairment of goodwill of GBP62.7m (FY 2021: GBPnil) is a
non-cash impairment principally relating to the Group's wireless
operating segment where reductions in sales volumes, predominantly
linked to lower levels of smartphone-related demand and continuing
softness in 5G infrastructure, is forecast to result in lower
levels of capacity use and profitability in this segment. The
impairment results from the near-term softness in forecasts for
wireless products as a result of the industry-wide semiconductor
downturn driven by inventory build-up throughout the supply
chain.
Operational highlights
-- Positive progress on the implementation of the Group's growth
strategy set out at its November 2022 Capital Markets Day
-- Technological innovations supporting IQE's diversification
into high-growth markets including power electronic and microLED
display products
o Development of world's first commercially available 200 mm
(8") VCSEL wafer opens significant opportunities with new foundry
partnerships
o Advanced display technology expanded with continued
development of microLED based on GaN (Blue & Green) & GaAs
(Red)
o Ongoing capex focused on investment in Gallium Nitride ("GaN")
manufacturing capacity to further strengthen power electronic and
advanced display capabilities
-- Continued strengthening of operational processes laying foundations for future growth
o Launch of new manufacturing management software in South Wales
ahead of global roll-out will deliver consistent and scalable
improvements to operational performance
o Building commercial engine, including global sales and
customer excellence functions
-- Positive commercial progress made in line with our growth strategy
o Long-term and strategic agreements signed with several
customers, across existing and new product segments
o Active pipeline of deals for development and mass production
of epiwafers for power electronics
-- Global site optimisation programme continued in line with strategy
o Singapore site closed in June 2022 and Pennsylvania site on
track to be closed by 2024
-- Established the IQE Innovation Centre at the Cardiff, South Wales site
Current Trading and Outlook
-- Current trading is affected by the temporary semiconductor
industry downturn, with reduced customer forecasts, orders and
associated revenue
-- H1 2023 revenue expected to be in the range of GBP50-56m
-- Net debt as at 31 March 2023 was c.GBP24.0m (net debt is
defined as cash less borrowings but excluding lease liabilities and
fair value gains/losses on derivative instruments)
-- FY23 revenue in line with management expectations set out in
March 2023 which include a return to year-on-year growth during the
second half of 2023
-- Diversification into high-growth markets of power and
display, targeting GaN growth opportunities in FY 2024 and
beyond
-- The Company expects PP&E capex related to essential
maintenance and health & safety items and existing commitments
to be approximately GBP7.4m in FY 2023. In addition, the
diversification strategy will lead to investment in GaN
manufacturing capacity of approximately GBP8.3m.
Proposed fundraise and banking facilities
The Company has announced today a placing to raise up to GBP30
million ("the Placing") and a Rex retail offer of up to GBP3
million (together with the Placing, the "Fundraising") in order to
ensure that the Company can continue to invest to execute on its
strategy, meet its near-term liquidity requirements and deliver a
sustainable balance sheet position going forward. IQE is
prioritising investment in GaN capacity as part of its long-term
growth strategy, underpinning the diversification into the power
electronics and microLED display segments.
The Group has entered into an agreement with its lending bank,
HSBC, to extend the term of its $35m RCF to May 2026, conditional
on the completion of the Placing. The facility was due to expire in
April 2024. The Company has also agreed revised leverage and
interest cover covenants, with quarterly testing from 31 December
2023.
If the Placing were not to proceed, the Company would receive
less preferential terms from HSBC with the likelihood that further
Bank support or alternative sources of capital will be required to
increase liquidity in the course of 2023 in order to ensure both
sufficient headroom and covenant compliance.
The full terms and conditions of the placing are set out in the
Fundraising announcement and can be found on our website at
https://www.iqep.com/investors/capital-raise-2023/ .
Americo Lemos, CEO of IQE, commented:
"IQE delivered a solid full year performance and improved
margins in 2022 despite a challenging industry backdrop. Our
strategic and long-term customer engagement model was validated by
the announcement of several key partnership agreements during the
year, and has resulted in a healthy new business pipeline. We
remain confident in the strategy we announced at our Capital
Markets Day and are focused on diversifying into high-growth
markets such as power electronics and microLED displays. The
Fundraising we have announced today will enable us to continue to
invest in GaN technologies for these applications, while providing
us with the fiscal headroom to navigate the current cyclical
downturn."
Results Presentation
IQE will present its FY 2022 Results via webcast and conference
call at 9:00am BST on Thursday 18 May 2023. If you would like to
view this webcast, please register by using the below link and
follow the instructions:
https://brrmedia.news/IQE_FY22
This Announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No. 596/2014, as
it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 (as amended). This announcement is issued on
behalf of IQE by Tim Pullen, CFO.
Contacts:
IQE plc
+44 (0) 29 2083 9400
Americo Lemos
Tim Pullen
Amy Barlow
Peel Hunt (Nomad and Joint Broker)
+44 (0) 20 7418 8900
Paul Gillam
Richard Chambers
James Smith
Numis (Joint Broker)
+44 (0) 20 7260 1000
Simon Willis
Hugo Rubinstein
Iqra Amin
Headland Consultancy (Financial PR)
+ 44 (0) 20 38054822
Andy Rivett-Carnac: +44 (0) 7968 997 365
Chloe Francklin: +44 (0)78 3497 4624
ABOUT IQE
https://www.iqep.com/
IQE is the leading global supplier of advanced compound
semiconductor wafers and materials solutions that enable a diverse
range of applications across:
-- Smart Connected Devices
-- Communications Infrastructure
-- Automotive and Industrial
-- Aerospace and Security
As a scaled global epitaxy wafer manufacturer, IQE is uniquely
positioned in this market which has high barriers to entry. IQE
supplies the global market and is enabling customers to innovate at
chip and OEM level. By leveraging the Group's intellectual property
portfolio including know-how and patents, it produces epitaxy
wafers of superior quality, yield and unit economics.
IQE is headquartered in Cardiff UK, with employees across eight
manufacturing locations in the UK, US and Taiwan, and is listed on
the AIM Stock Exchange in London.
Financial Review
The Group reports financial performance in accordance with
International accounting standards in conformity with UK adopted
international accounting standards ('UK adopted IFRS') and provides
disclosure of additional alternative non IFRS GAAP performance
measures to provide further understanding of financial performance.
Details of the alternative performance measures used by the Group,
including a reconciliation to reported UK adopted IFRS GAAP
performance measures, are set out in note 4.
Current outlook
The Group's trading in 2022 was impacted by the broader
semiconductor industry downturn, in particular increasing softness
in smartphone-related demand and weakness in 5G infrastructure
demand in the latter part of the year. Group revenue of GBP167.5m
(2021: GBP154.1m) has increased 9% benefiting from a foreign
exchange tailwind of 10.6%. The Group has reported an operating
loss of GBP73.0m (2021: GBP20.0m) which includes a non-cash
impairment charge of GBP62.7m related to the write-down of goodwill
resulting from a change in forecasts related to the current
semiconductor downturn and the associated market softness impacting
the Group.
Current trading is affected by the temporary semiconductor
industry downturn, with reduced customer forecasts, orders and
associated revenue. First half revenue is expected to be in the
range of GBP50m-GBP56m. Net debt as at 31 March 2023 was c.GBP24m
(net debt is defined as cash less borrowings but excluding lease
liabilities and fair value gains/losses on derivative instruments).
Full year revenue for FY23 is expected to include a return to
year-on-year growth during the second half. The Group is targeting
diversification into the high-growth markets of power and advanced
display by investing in the expansion of its GaN capacity. The
Company expects PP&E capex related to essential maintenance and
health & safety items and existing commitments to be
approximately GBP7.4m in FY23. In addition, the diversification
strategy will lead to investment in GaN of approximately
GBP8.3m.
Steps have been taken by the Directors to strengthen the balance
sheet of the business in the short-term, including the renewal of
the Group's GBP28.7m ($35.0m) multi-currency revolving credit
facility provided by HSBC Bank plc and the announced GBP30m equity
fundraise. These steps, combined with a number of post-year end
cost rationalisation and cash preservation actions that have been
implemented by the Directors will provide the necessary liquidity
for the Group to navigate the current semiconductor market
downturn, provide sufficient headroom to protect against the
recovery occurring later than forecast, and allow the Group to
continue investing in its growth and diversification strategy.
Review of the year
Group revenue of GBP167.5m (2021: GBP154.1m) has increased 9%,
benefiting from a foreign exchange tailwind of 10.6% on a reported
basis where increases in Photonics revenues have offset declines in
Wireless revenues.
The Group's Photonics business segment represents the largest
proportion of the Group's revenue, accounting for 52.9% (2021:
44.2%) of total wafer sales with Wireless representing 45.4% (2021:
54.0%) and CMOSS++ representing 1.7% (2021: 1.8%).
Photonics wafer revenues increased 30% to GBP88.7m (2021:
GBP68.1m). The increase in Photonics wafer revenues reflects the
continued strength in demand for VCSELs used in 3D sensing,
including the impact of increased customer diversification
following the Group's announcement of a new multi-year strategic
agreement with a global consumer electronics leader in early Q4
2022, and as a result of higher other photonic product sales linked
to a combination of factors including the re-phasing of certain
defence and security orders associated with large programmes and
strong demand for the Group's substrate related products.
Wireless wafer revenues decreased 9% to GBP76.0m (2021:
GBP83.2m). The decrease in wireless wafer revenues reflects a
decline in wireless GaAs epiwafer sales, continued softness in 5G
infrastructure, and the impact of the closure of the Group's
manufacturing facility in Singapore that focused on the manufacture
and sale of legacy pHEMT epiwafers. The reduction in wireless GaAs
epiwafer sales in particular has been impacted by softness in the
broader smartphone handset market which has led to increased
inventory levels throughout the manufacturing supply chain. This
has continued to adversely affect demand for wireless GaAs
epiwafers in H1 2023.
Statutory gross profit increased from GBP17.6m to GBP26.4m. The
increase in gross profit reflects a combination of a favourable
shift in sales mix with a higher proportion of the group's revenue
derived from higher margin photonics products and the impact of a
favourable foreign exchange tailwind which has helped to increase
gross profit margin percentage to 15.8% (2021: 11.5%). Adjusted
gross profit, which excludes the charge for share based payments,
increased from GBP18.7m to GBP26.5m with an increase in gross
margin from 12.2% to 15.8%.
Selling, general and administrative ('SG&A') expenses have
increased 2.9% in the year from GBP30.3m to GBP31.2m, excluding the
separately disclosed impairment loss on intangible assets of
GBP66.2m (2021: GBP7.4m) and the impairment loss of GBP2.3m (2021:
GBP0.03m credit) related to a small number of customer specific
receivables. Adjusted SG&A expenses, which exclude adjustments
for share based payments, restructuring costs, Chief Executive
Officer recruitment costs and asset impairments have increased from
GBP25.3m to GBP26.8m (5.7%), reflecting a combination of
inflationary pressure, certain employee-related investment and
increases in certain legal and professional costs.
As part of the Group's global footprint optimisation plan
restructuring costs totalling GBP4.2m (2021: GBP3.7m) have been
incurred relating to costs associated with the announced closure of
the Group's manufacturing facility in Pennsylvania, USA and the
closure of the Group's manufacturing facility in Singapore. Within
the restructuring costs are GBP3.0m (2021: GBP3.0m) relating to a
combination of site decommissioning, asset write-downs and employee
related costs in Singapore and GBP1.2m (2021: GBP0.7m) relating to
employee related and asset decommissioning costs associated with
the closure of the Pennsylvania, USA site.
Chief Executive Officer recruitment costs of GBP0.2m (2021:
GBP0.7m) include share award and cash costs associated with the new
Chief Executive Officer's starting bonus and the partial release of
accrued prior period external Chief Executive Officer recruitment
fees that were linked to first year annual bonus awards. Chief
Executive Officer recruitment costs in 2021 included settlement
costs and legal fees of GBP0.3m associated with the transition of
the former Chief Executive Officer to a non-executive role and
external recruitment fees of GBP0.4m.
Impairment of goodwill of GBP62.7m (2021: GBPnil) principally
relates to the Group's wireless operating segment where reductions
in sales volumes, primarily linked to lower levels of
smartphone-related demand and continuing weakness in 5G
infrastructure is forecast to result in lower levels of capacity
utilisation and operating segment profitability. The non-cash
impairment results from the near-term softness in forecasts for
wireless products as a result of the industry-wide semiconductor
downturn which, has in turn, resulted from geopolitical shifts, the
lingering effects of the pandemic in which inventory levels built
up in the industry and increasing inflationary pressure.
Impairment of intangibles of GBP3.4m (2021: GBP7.4m) relates to
the impairment of distributed feedback laser technology development
costs where the Group has taken the decision to discontinue the
development and commercialisation of the technology. The impairment
in 2021 related to the write-down in value of the Group's cREO(TM)
filter technology development cost and patent assets totalling
GBP4.7m and the impairment of Photonic quasi crystal
technology-related development costs and patent assets totalling
GBP2.7m.
A reported operating loss of GBP73.0m has been incurred (2021:
GBP20.0m), primarily due to the non-cash impairment of goodwill of
GBP62.7m. Reflecting the adjustments noted above, an adjusted
operating loss of GBP3.6m in 2022 compares to an adjusted operating
loss of GBP6.5m in 2021. The reduction in the loss principally
reflects the positive impact of a favourable shift in sales mix and
a foreign exchange tailwind at a gross profit level partially
offset by increases in SG&A expenses. The segmental analysis in
note 3 reflects the adjusted operating margins for the primary
segments (before central corporate support costs).
Photonics-adjusted operating margins increased from 2.6% in 2021 to
12.6% in 2022 reflecting a combination of improved capacity
utilisation and favourable customer and product mix.
Wireless-adjusted operating margins declined from 8.8% in 2021 to
6.2% in 2022, primarily reflecting reductions in volume and the
associated under-utilisation of certain manufacturing capacity. The
Group is targeting a reduction in under-utilised capacity through
the closure of both the Singapore manufacturing site (completed in
mid-2022) and the Pennsylvania site (due to be completed by
2024).
Finance costs of GBP2.4m (2021: GBP2.2m) reflect GBP1.1m (2021:
GBP0.9m) of bank and other interest costs and the interest expense
on lease liabilities of GBP1.3m (2021: GBP1.3m). Bank and other
interest costs principally relate to the Group's HSBC Bank plc
revolving credit and asset finance facilities with the increase in
interest cost reflecting a combination of an increase in net debt
and an increase in the interest rate as both the Bank of England
Base Rate and the Sterling Overnight Index Average ('SONIA')
interest rate benchmarks have increased during the year.
The tax credit of GBP0.9m (2021: GBP8.8m charge) consists of a
current tax charge of GBP0.1m (2021: GBP1.1m) primarily relating to
taxable profits generated by the Group's Taiwanese operations and a
deferred tax credit of GBP1.0m (2021: GBP7.7m charge). Deferred tax
asset recognition has been restricted in the UK to GBPnil to
reflect future forecast profitability, an assessment that includes
the impact of market softness in trading forecasts as a result of
the industry-wide semiconductor downturn and the impact of the
Group's consolidation and investment in central and functional
roles, whilst US deferred tax asset recognition has been restricted
to GBPnil to reflect lower future forecast profitability arising
from a combination of market softness, the Group's consolidation of
its US manufacturing operations and the continued shift in the
balance of future forecast manufacturing and hence profits from the
Group's US operations to its UK and Asian operations. The effective
tax rate of 1.1% (2021: 13.3%) applicable to the tax credit of
GBP0.8m (2021: GBP1.8m) on adjusted items is less than the UK
statutory tax rate of 19%, primarily due to the non-recognition of
deferred tax assets for current year UK, US and Singapore trading
losses which include the adjusted Chief Executive Officer
recruitment, Singapore and Pennsylvania site closure costs and
intangible asset impairments.
The increase in the loss for the year to GBP74.5m (2021:
GBP31.0m) reflects a combination of the underlying trading
performance noted above and the impact of adjusted non-cash and
other non-operational items, which at an adjusted level, has
reduced the loss to GBP5.9m (2021: GBP19.3m).
Basic and diluted loss per share has increased from a loss per
share of 3.87p to a loss per share of 9.27p in the current year
with adjusted basic and diluted loss per share of 0.74p (2021:
2.41p), reflecting the Group's loss at a statutory and adjusted
profit level.
Cash generated from operations decreased in the year to GBP8.9m
(2021: GBP18.9m), reflecting the Group's favourable trading
performance offset by adverse working capital and the cash impact
of adjusted non-operational items. The Group has continued to
invest in growing capacity to meet demand with capital expenditure
of GBP9.4m (2021: GBP15.1m) principally focused in Taiwan and
Massachusetts to support future growth opportunities, intangible
asset expenditure of GBP4.7m (2021: GBP0.3m) focused on a
combination of intellectual property and the Group's multi-year
strategic IT transformation programme and investment in targeted
capitalised technology development of GBP3.8m (2021: GBP3.0m).
The decrease in cash generated from operations, combined with
investing activity cash costs of GBP10.7m (2021: GBP18.3m) and
repayment of lease liabilities of GBP4.9m (2021: GBP3.7m), net of
net proceeds from bank borrowings of GBP9.6m (2021: GBP6.1m
repayment), have combined to maintain the Group's cash position of
GBP11.6m (2021: GBP10.8m), but increase net debt (excluding lease
liabilities and derivative financial instruments) from GBP5.8m to
GBP15.2m as at 31 December 2022.
Since the year end, the Group has experienced a deepening of the
market softness that has impacted 2022, resulting in an increase in
the Group's net debt position prior to the ongoing steps that are
being taken to strengthen the balance sheet of the Group. The
proposed GBP30m equity fundraise and completed refinancing of the
Group's GBP28.7m ($35m) multi-currency revolving credit facility
provided by HSBC Bank plc provide the necessary liquidity for the
business to continue to operate and invest in its growth and
diversification strategy.
Equity shareholder funds total GBP175.1m (2021: GBP234.6m) with
the movement from 2021 primarily reflecting the loss for the year
and foreign exchange differences arising on the retranslation of
net investments in overseas subsidiaries.
Financial Statements
Financial summary
2022 2021
GBPm GBPm
============================== ======= =======
Revenue 167.5 154.1
Adjusted EBITDA (see below) 23.4 18.7
Operating (loss)/profit
* Adjusted* (3.6) (6.5)
* Reported (73.0) (20.0)
(Loss)/profit after tax
* Adjusted* (5.9) (19.3)
* Reported (74.5) (31.0)
Net cash flow from operations
Adjusted* (note 4) 15.7 17.9
Reported 8.9 18.9
Free cash flow**
Before exceptional cash flows 4.2 (1.7)
Reported (2.6) (0.7)
Adjusted net (debt)/cash*** (15.2) (5.8)
Equity shareholders' funds 175.1 234.6
Basic EPS - adjusted**** (0.74p) (2.41p)
Basic EPS - unadjusted (9.27p) (3.87p)
Diluted EPS - adjusted**** (0.74p) (2.41p)
Diluted EPS - unadjusted (9.27p) (3.87p)
============================== ======= =======
* The adjusted performance measures for 2022 and 2021 are reconciled in note 4.
** Free cash flow is defined as net cash outflow of GBP0.1m
(2021: GBP14.1m outflow) before cash flows from financing
activities of GBP4.7m (2021: outflow of GBP11.2m) and net interest
paid of GBP2.2m (2021: GBP2.2m).
*** Adjusted net (debt)/cash is defined as cash less borrowings
but excluding lease liabilities and fair value gains/losses on
derivative instruments.
**** Adjusted EPS measures exclude the impact of certain
non-cash charges, non-operational items and significant infrequent
items that would distort period on period comparability (see note
5).
Consolidated income statement for the year ended 31 December
2022
2022 2021
GBPm GBPm
================================================ ======= =======
Revenue 167.5 154.1
------------------------------------------------- ------- -------
Cost of sales (141.1) (136.5)
================================================= ======= =======
Gross profit 26.4 17.6
Selling, general and administrative expenses (31.2) (30.3)
Impairment loss on intangible assets (66.2) (7.4)
Impairment (loss)/reversal on trade receivables
and contract assets (2.3) -
Profit on disposal of intangible assets and
property, plant and equipment 0.7 0.1
Other losses (0.4) -
================================================= ======= =======
Operating loss (73.0) (20.0)
Finance costs (2.4) (2.2)
================================================= ======= =======
Adjusted loss before income tax (6.0) (8.7)
------------------------------------------------- ------- -------
Adjustments (69.4) (13.5)
================================================= ======= =======
Loss before income tax (75.4) (22.2)
------------------------------------------------- ------- -------
Taxation 0.9 (8.8)
================================================= ======= =======
Loss for the year (74.5) (31.0)
================================================= ======= =======
Loss attributable to:
Equity shareholders (74.5) (31.0)
================================================= ======= =======
(74.5) (31.0)
================================================ ======= =======
Loss per share attributable to owners of the
parent during the year
Basic loss per share (9.27p) (3.87p)
Diluted loss per share (9.27p) (3.87p)
================================================= ======= =======
Adjusted basic and diluted loss per share are presented in note
5.
All items included in the loss for the year relate to continuing
operations.
Consolidated statement of comprehensive income for the year
ended 31 December 2022
2022 2021
GBP'000 GBP'000
=========================================================== ======== ========
Loss for the year (74.5) (31.0)
Exchange differences on translation of foreign operations* 14.5 4.7
=========================================================== ======== ========
Total comprehensive expense for the year (60.0) (26.3)
=========================================================== ======== ========
Total comprehensive expense attributable to:
Equity shareholders (60.0) (26.3)
=========================================================== ======== ========
(60.0) (26.3)
=========================================================== ======== ========
* Items that may subsequently be reclassified to profit or loss.
Items in the statement above are disclosed net of tax.
Consolidated balance sheet as at 31 December 2022
2022 2021
GBPm GBPm
============================================= ======= =======
Non-current assets
Intangible assets 37.0 95.9
Fixed asset investments - -
Property, plant and equipment 127.1 129.7
Right of use assets 41.4 44.3
Deferred tax assets - -
Other financial assets - -
============================================= ======= =======
Total non-current assets 205.5 269.9
============================================== ======= =======
Current assets
Inventories 34.2 31.7
Trade and other receivables 44.8 38.9
Cash and cash equivalents 11.6 10.8
============================================== ======= =======
Total current assets 90.6 81.4
============================================== ======= =======
Total assets 296.1 351.3
============================================== ======= =======
Current liabilities
Trade and other payables (37.6) (37.1)
Current tax liabilities (0.7) (1.3)
Bank borrowings (6.2) (6.2)
Derivative financial instruments (0.4) -
Lease liabilities (4.8) (4.7)
Provisions for other liabilities and charges (1.6) (3.7)
============================================== ======= =======
Total current liabilities (51.3) (53.0)
============================================== ======= =======
Non-current liabilities
Bank borrowings (20.6) (10.4)
Lease liabilities (46.0) (49.7)
Deferred tax liabilities (1.1) (2.1)
Provisions for other liabilities and charges (2.0) (1.5)
============================================== ======= =======
Total non-current liabilities (69.7) (63.7)
============================================== ======= =======
Total liabilities (121.0) (116.7)
---------------------------------------------- ------- -------
Net assets 175.1 234.6
============================================== ======= =======
Equity attributable to the shareholders of
the parent
Share capital 8.0 8.0
Share premium 154.7 154.6
Retained earnings (45.2) 29.3
Exchange rate reserve 40.5 26.0
Other reserves 17.1 16.7
============================================== ======= =======
Total equity 175.1 234.6
============================================== ======= =======
Consolidated statement of changes in equity for the year ended
31 December 2022
Retained
Share earnings Exchange Total
capital Share premium / (losses) Rate reserve Other reserves equity
GBPm GBPm GBPm GBPm GBPm GBPm
========================= ======== ============= =========== ============= ============== =======
At 1 January 2022 8.0 154.6 29.3 26.0 16.7 234.6
========================= ======== ============= =========== ============= ============== =======
Comprehensive expense
Loss for the year - - (74.5) - - (74.5)
Other comprehensive
expense for the year - - - 14.5 - 14.5
========================= ======== ============= =========== ============= ============== =======
Total comprehensive
expense for the year - - (74.5) 14.5 - (60.0)
Transactions with owners
Share based payments - - - - 0.3 0.3
Tax relating to share
options - - - - 0.1 0.1
Proceeds from shares
issued - 0.1 - - - 0.1
========================= ======== ============= =========== ============= ============== =======
Total transactions with
owners - 0.1 - - 0.4 0.5
At 31 December 2022 8.0 154.7 (45.2) 40.5 17.1 175.1
========================= ======== ============= =========== ============= ============== =======
Exchange
Share Share Retained Rate Total
capital premium earnings reserve Other reserves equity
GBPm GBPm GBPm GBPm GBPm GBPm
========================================= ======== ======== ========= ======== ============== =======
At 1 January 2021 8.0 154.2 62.1 21.3 14.9 260.5
========================================= ======== ======== ========= ======== ============== =======
Comprehensive expense
Loss for the year - - (31.0) - - (31.0)
Other comprehensive expense for the year - - - 4.7 - 4.7
========================================= ======== ======== ========= ======== ============== =======
Total comprehensive expense for the year - - (31.0) 4.7 - (26.3)
Transactions with owners
Share based payments - - - - 1.9 1.9
Tax relating to share options - - - - (0.1) (0.1)
Proceeds from shares issued - 0.4 - - - 0.4
Acquisition of non-controlling interest - - (1.8) - - (1.8)
========================================= ======== ======== ========= ======== ============== =======
Total transactions with owners - 0.4 (1.8) - 1.8 0.4
At 31 December 2021 8.0 154.6 29.3 26.0 16.7 234.6
========================================= ======== ======== ========= ======== ============== =======
Other reserves relate to share based payments.
Consolidated cash flow statement for the year ended 31 December
2022
2022 2021
GBPm GBPm
============================================== ====== ======
Cash flows from operating activities
============================================== ====== ======
Adjusted cash inflow from operations 15.7 17.9
------
Cash impact of adjustments (6.8) 1.0
=============================================== ====== ======
Cash generated from operations 8.9 18.9
Net interest paid (2.2) (2.2)
------
Income tax paid (0.8) (1.3)
=============================================== ====== ======
Net cash generated from operating activities 5.9 15.4
=============================================== ====== ======
Cash flows from investing activities
Purchase of property, plant and equipment (9.4) (15.1)
Purchase of intangible assets (4.7) (0.3)
Capitalised development expenditure (3.8) (3.0)
Proceeds from disposal of property, plant
and equipment and intangible assets 7.2 0.1
----------------------------------------------- ------ ------
Adjusted cash used in investing activities (16.8) (18.3)
Cash impact of adjustments - proceeds from
disposal of property, plant and equipment
and intangible assets 6.1 -
----------------------------------------------- ------ ------
Net cash used in investing activities (10.7) (18.3)
=============================================== ====== ======
Cash flows from financing activities
Acquisition of minority interest - (1.8)
Proceeds from issuance of ordinary shares 0.1 0.4
Proceeds from borrowings 15.8 -
Repayment of borrowings (6.2) (6.1)
Payment of lease liabilities (4.9) (3.7)
=============================================== ====== ======
Net cash generated from / (used in) financing
activities 4.8 (11.2)
=============================================== ====== ======
Net decrease in cash and cash equivalents - (14.1)
Cash and cash equivalents at 1 January 10.8 24.7
Exchange losses on cash and cash equivalents 0.8 0.2
=============================================== ====== ======
Cash and cash equivalents at 31 December 11.6 10.8
=============================================== ====== ======
Notes to the financial statements for the year ended 31 December
2022
1. General information
IQE plc ('the company') and its subsidiaries (together 'the
Group') develop, manufacture and sell advanced semiconductor
materials. The Group has manufacturing facilities in Europe, United
States of America and Asia and sells to customers located
globally.
IQE plc is a public limited company incorporated in the United
Kingdom under the Companies Act 2006. The Company is domiciled in
the United Kingdom and is quoted on the Alternative Investment
Market (AIM). The address of the Company's registered office is
Pascal Close, St Mellons, Cardiff, CF3 0LW.
2. Significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all years presented.
2.1 Basis of preparation
The financial statements have been prepared and approved by the
directors in accordance with international accounting standards in
conformity with UK adopted international accounting standards ("UK
adopted IFRS"). The financial statements have been prepared under
the historical cost convention except where fair value measurement
is required by IFRS.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Group's accounting policies.
2.2 Going concern
The financial statements are prepared on a going concern basis
as the Directors believe that the Group has a strong strategy,
exciting future opportunities and are taking the necessary steps to
capitalise the Group with sufficient liquidity to navigate the
current temporary semiconductor industry downturn. Without taking
these steps, a material uncertainty exists around the going concern
status of operations in the current semiconductor market downturn,
related to the low level of liquidity headroom and bank covenant
compliance in base case financial forecasts and the uncertainty
over timing of the anticipated market recovery. The Group is
currently experiencing weaker customer demand and a reduction in
customer orders and forecasts as a result of the industry
downturn.
The Directors consider that the current industry and economic
outlook presents a temporary but significant challenge to sales
volumes in the first half of 2023. The Group's trading in Q1 2023
has experienced a deepening of the market softness that impacted
the latter part of 2022 as weaker customer demand, orders and
forecasts are expected to result in a year-on-year decline in
revenue of approximately GBP30.0m in H1 2023 prior to an
anticipated improvement in market dynamics and customer demand in
H2 2023.
The Directors have taken steps, and plan to take further steps
to strengthen the balance sheet of the Group in order to mitigate
the material uncertainty and associated financial impact of the
current semiconductor market downturn.
Actions taken since the year-end:
-- The implementation of cost cutting actions, including staff
redundancies, operational efficiencies and reductions in areas of
discretionary expenditure which are under the control of the
Directors.
-- Deferral of capital expenditure under the control of the Directors.
The steps taken to capitalise the Group with sufficient
liquidity are as follows.
1. Refinancing of the Group's GBP28.7m ($35.0) multi-currency
revolving credit facility provided by HSBC Bank plc on 17 May 2023.
The tenor of the facility has been extended to 1 May 2026 in the
event of a successful equity fund raise of greater than GBP25.0m on
or before 23rd May 2023. Quarterly leverage and interest cover
covenant tests will apply to the facility, commencing at December
2023.
2. The Group is launching an equity fundraise via an accelerated
bookbuild process, immediately upon the announcement of these
unaudited preliminary financial statements. The Group is planning
to raise GBP30.0m via the Placing in order to ensure that the
Company can continue to invest to execute on its strategy, meet its
near-term liquidity requirements and deliver a sustainable balance
sheet position going forward.
In the event that less than GBP25.0m of equity is raised, the
tenor of the facility will be to 1 May 2025 and the new facility
will be subject to a minimum monthly liquidity requirement of a
GBP3.0m cash holding, with quarterly leverage and interest cover
covenant tests commencing at June 2023. In this scenario, the Group
would work with the relationship lending bank to navigate forecast
covenant breaches.
In the year to 31 December 2022, reported revenue growth of 9%
was recorded, although the Group has reported an operating loss of
GBP73.0m for the year (2021: GBP20.0m loss). This includes a
non-cash impairment charge of GBP62.7m related to the write-down of
goodwill, which results from a change in forecasts related to the
current semiconductor industry downturn. The Group increased its
net debt position (excluding lease liabilities and fair value
gains/losses on derivative instruments) to GBP15.2m (2021:
GBP5.8m). At 31 December 2022 the Group had undrawn committed
funding of GBP12.4m ($15.0m) available under the terms of its
credit facilities.
In assessing the going concern basis of preparation the
Directors have reviewed financial projections to 31 December 2024
('the going concern assessment period'), containing both a 'base
case' and a 'severe but plausible downside case'. The going concern
assessment period extends beyond the minimum required 12-month
period from the date of approval of the financial statements to
protect against the recovery in the semiconductor market occurring
later than forecast by the Directors.
Base Case
The base case is the Group's Q1 2023 Board approved 2023 and
2024 forecasts. The base case incorporates the impact of current
market softness, weak customer demand and post year end actions,
including the refinancing of the Group's bank facilities, taken by
the Directors but does not include the mitigating impact of the
GBP30.0m equity fund raise planned by the Directors.
The base case was prepared with the following key
assumptions:
-- Revenue for 2023 in line with current analyst consensus, with
a forecast return to year-on-year growth in 2024
-- Direct wafer product margins consistent with 2022
-- Labour inflation in 2024 in line with labour market norms
-- Cost inflation in operating and administrative costs in line
with the current inflationary environment
-- Mitigating cost actions, resulting in a reduction in total
overheads by c.7% year-on-year in 2023, despite inflationary
pressures in some cost categories
-- c.GBP15.0m of capital expenditure in 2023 and 2024 reflecting
a combination of essential maintenance capital expenditure and
investment in Gallium Nitride (GaN) related manufacturing capacity,
enabling diversification into the high-growth power electronics and
advanced display (uLED) markets
In the base case the Group is forecast to maintain low levels of
funding headroom throughout the going concern assessment period
with liquidity of GBP5.8m at the end of 2023 and GBP9.0m at the end
of 2024. Liquidity during periods of 2024 is forecast to be very
limited and assumes that the existing facilities remain available.
The Group is forecast to breach its leverage, interest cover and
minimum monthly liquidity covenants in one or more periods in 2023
and breach its minimum monthly liquidity covenant in more than one
period in 2024. Net debt (excluding lease liabilities and fair
value gains/losses on derivatives) is forecast to increase to a
maximum of GBP30.7m in Q4 2023 before declining to GBP27.1m at the
end of 2023 and GBP19.7m at the end of 2024.
Severe but plausible downside case
The severe but plausible downside case was prepared using the
following key assumptions:
-- Revenue is assumed at 15% down on the base case for 2023 and
14% down on the base case for 2024
-- In line with the revenue reduction in both years, there is a
reflective reduction in variable operating costs for 2023 and 2024
along with additional incremental cost savings that include idling
of tools, labour savings, reductions in research and development
expenditure and reductions in certain non-manufacturing related
discretionary expenditure that can be controlled by the
Directors
-- Deferral of certain capital expenditure in 2023 and 2024 that
can be controlled by the Directors
The severe but plausible downside case would leave the Group
with insufficient liquidity from Q3 2023 with additional liquidity
of at least GBP19,313,000 required in the going concern assessment
period assuming that the existing facilities remain available. In
the severe but plausible downside case the group is forecast to
breach its leverage, interest cover and minimum monthly liquidity
covenants in one or more periods in 2023 and 2024. Net debt
(excluding lease liabilities and fair value gains/losses on
derivatives) is forecast to increase to a maximum of GBP40.2m in
2023 and GBP48.0m in 2024.
Having reviewed the base case and severe but plausible downside
case the Directors of the Group have concluded that additional
equity funding, in combination with the completed refinancing of
the Group's GBP28.7m ($35.0m) multi-currency revolving credit bank
facility, is required from the Group's shareholders in order to
avoid insufficient liquidity and covenant breaches during the going
concern assessment period. The Directors plan to raise GBP30.0m
through an equity fund raise to provide the necessary liquidity to
continue trading during the current semiconductor market downturn,
provide sufficient headroom to protect against the recovery
occurring later than forecast and provide sufficient headroom for
the Group to operate in compliance with its banking covenants. The
Directors acknowledge that there can be no certainty that the
additional funding will be available, however, they have no reason
to believe that shareholders will not continue to remain supportive
at the date of approval of these financial statements.
In the event of a successful fundraise of GBP30.0m, the Group is
forecasting to maintain covenant compliance and have positive
liquidity throughout the 2023 and 2024 going concern assessment
period, in both base case and severe but plausible downside
scenarios.
The Directors have concluded that the uncertainty of the equity
raise launched on 17 May 2023 indicates the existence of a material
uncertainty that may cast significant doubt on the group's ability
to continue as a going concern and, therefore, that the group may
be unable to realise its assets and discharge its liabilities in
the normal course of business. The Directors are confident that
shareholders will remain supportive and that sufficient funds will
be received through the equity raise and therefore have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the going concern assessment
period. Accordingly, these financial statements do not include any
adjustments to the carrying amount or classification of assets and
liabilities that would result if the Group were unable to continue
as a going concern.
2.3 Changes in accounting policy and disclosures
a) New standards, amendments and interpretations.
The following new standards, amendments and interpretations have
been adopted by the Group for the first time for the financial year
beginning on 1 January 2022:
-- Amendment to IFRS 3 'Business combinations' to update
references to the Conceptual Framework for Financial Reporting
without changing the accounting requirements for business
combinations.
-- Amendments to IAS 16 'Property, plant and equipment' to
prohibit the deduction from cost of property, plant and equipment
amounts received from selling items produced while preparing the
asset for its intended use with any such sales and related cost
recognised in profit or loss.
-- Amendments to IAS 37 'Provisions, contingent liabilities and
contingent assets' to specify which costs a company includes when
assessing whether a contract will be loss making.
-- Annual improvements to IFRSs 2018-2020 cycle to make minor
amendments to IFRS 1 'First-time adoption of IFRS', IFRS 9
'Financial Instruments', IAS 41 'Agriculture' and amendments to the
illustrative examples accompanying IFRS 16 'Leases'.
The adoption of these standards, amendments and interpretations
has not had a material impact on the financial statements of the
Group or parent company.
b) New standards, amendments and interpretations issued but not
effective and not adopted early
A number of new standards, amendments to standards and
interpretations which are set out below are effective for annual
periods beginning after 1 January 2023 and have not been applied in
preparing these consolidated financial statements:
-- IFRS 17 'Insurance contracts' which establishes the
principles for the recognition, measurement, presentation and
disclosure of insurance contracts and supersedes IFRS 4 'Insurance
Contracts'.
-- Amendments to IAS 1 'Presentation of financial statements' on
classification of liabilities which is intended to clarify that
liabilities are classified as either current or non-current
depending upon the rights that exist at the end of the reporting
period and amendments to the disclosure of accounting policies
which will require disclosure of material rather than significant
accounting policies.
-- Amendment to IAS 8 'Accounting policies, changes in
accounting estimates and errors' to introduce a new definition for
accounting estimates which clarifies that an accounting estimate is
a monetary amount in the financial statements that is subject to
measurement uncertainty. Amendment to IAS 12 'Income taxes' to
clarify the accounting treatment for deferred tax on certain
transactions with a narrowing of the scope of the initial
recognition exemption so that it does not apply to transactions
that give rise to equal and offsetting temporary differences.
The Directors anticipate that at the time of this report none of
the new standards, amendments to standards or interpretations are
expected to have a material effect on the financial statements of
the Group or parent company.
3. Segmental analysis
3.1 Description of segments and principal activities
The Chief Operating Decision Maker is defined as the Executive
Leadership Team. The Executive Leadership Team, consisting of the
Chief Executive Officer, Chief Financial Officer, Chief Operations
Officer, Chief Technology Officer, Chief People Officer, Executive
VP Global Business Development, Sales, Executive VP Product
Management and the Executive VP General Counsel & company
secretary, consider the group's performance from a product
perspective and have identified three primary reportable
segments:
-- Wireless - this part of the business manufactures and sells
compound semiconductor material for the wireless market which
includes radio frequency devices that enable wireless
communications.
-- Photonics - this part of the business manufactures and sells
compound semiconductor material for the photonics market which
includes applications that either transmit or sense light, both
visible and infrared.
-- CMOSS++ - this part of the business manufactures and sells
advanced semiconductor materials related to silicon which include
the combination of the advanced properties of compound
semiconductors with those of lower cost silicon technologies.
The Executive Leadership Team primarily use revenue and a
measure of adjusted operating profit to assess the performance of
the operating segments. Measures of total assets and liabilities
for each reportable segment are not reported to the Executive
Leadership Team and therefore have not been disclosed.
3.2 Adjusted Operating Loss
Adjusted operating loss excludes the effects of significant
non-cash, non-operational or significant and infrequent items of
income and expenditure which may have an impact on the quality of
earnings, such as restructuring costs, CEO recruitment costs and
impairments where the impairment is the result of an isolated,
non-recurring event. Adjusted operating loss also excludes the
effects of equity settled share-based payments.
Finance costs are not allocated to segments because treasury and
the cash position of the group is managed centrally.
2022 2021
Revenue GBPm GBPm
============================ ====== ======
Wireless 76.0 83.2
Photonics 88.7 68.1
CMOS++ 2.8 2.8
============================ ====== ======
Revenue 167.5 154.1
============================ ====== ======
Adjusted operating loss
============================ ====== ======
Wireless 4.7 7.3
Photonics 11.1 1.7
CMOS++ (1.5) (0.6)
Central corporate costs (17.9) (14.9)
============================ ====== ======
Adjusted operating loss (3.6) (6.5)
Adjusted items (see note 4)
============================ ====== ======
Wireless (63.8) (8.1)
Photonics (5.4) (3.9)
CMOS++ - -
Central corporate costs (0.2) (1.5)
============================ ====== ======
Operating loss (73.0) (20.0)
Finance costs (2.4) (2.2)
============================ ====== ======
Loss before tax (75.4) (22.2)
============================ ====== ======
4. Alternative performance measures
The Group's results report certain financial measures before a
number of adjusted items that are not defined or recognised under
IFRS, including adjusted earnings before interest, tax,
depreciation and amortisation, adjusted earnings before interest,
tax, depreciation and amortisation margin, adjusted operating loss,
adjusted loss before income tax and adjusted losses per share. The
Directors believe that the adjusted performance measures provide a
useful comparison of business trends and performance, and allow
management and other stakeholders to better compare the performance
of the Group between the current and prior year, excluding the
effects of certain non-cash charges, non-operational items and
significant infrequent items that would distort period on period
comparability. The Group uses these adjusted performance measures
for internal planning, budgeting, reporting and assessment of the
performance of the business.
The tables below show the adjustments made to arrive at the
adjusted performance measures and the impact on the Group's
reported financial performance.
2022 2021
Adjusted Adjusted Reported Adjusted Adjusted Reported
Results Items Results Results Items Results
GBPm GBPm GBPm GBPm GBPm GBPm
========================== ======== ======== ========= ======== ======== =========
Revenue 167.5 - 167.5 154.1 - 154.1
Cost of sales (141.0) (0.1) (141.1) (135.4) (1.1) (136.5)
========================== ======== ======== ========= ======== ======== =========
Gross profit 26.5 (0.1) 26.4 18.7 (1.1) 17.6
SG&A (26.8) (4.4) (31.2) (25.3) (5.0) (30.3)
Impairment of intangibles - (66.2) (66.2) - (7.4) (7.4)
Impairment of receivables (2.3) - (2.3) - - -
Other losses (0.4) - (0.4) - - -
Profit on disposal of
PPE and intangibles (0.6) 1.3 0.7 0.1 - 0.1
========================== ======== ======== ========= ======== ======== =========
Operating loss (3.6) (69.4) (73.0) (6.5) (13.5) (20.0)
Finance costs (2.4) - (2.4) (2.2) - (2.2)
========================== ======== ======== ========= ======== ======== =========
Loss before tax (6.0) (69.4) (75.4) (8.7) (13.5) (22.2)
Taxation 0.1 0.8 0.9 (10.6) 1.8 (8.8)
========================== ======== ======== ========= ======== ======== =========
Loss for the period (5.9) (68.6) (74.5) (19.3) (11.7) (31.0)
========================== ======== ======== ========= ======== ======== =========
2022 2021
Pre-tax Tax Adjusted Pre-tax Tax Adjusted
Adjustment Impact Results Adjustment Impact Results
GBPm GBPm GBPm GBPm GBPm GBPm
=============================== =========== ======= ========= =========== ======= =========
Share-based payments (0.2) (0.2) (0.4) (1.7) - (1.7)
Share-based payments
- CEO recruitment (0.1) - (0.1) - - -
CEO Recruitment (0.1) - (0.1) (0.7) - (0.7)
Impairment - goodwill (62.7) - (62.7) - - -
Impairment - other intangibles (3.4) 0.7 (2.7) (7.4) 1.8 (5.6)
Restructuring (4.2) - (4.2) (3.7) - (3.7)
Restructuring - profit
on disposal of PPE 1.3 0.3 1.6 - - -
=============================== =========== ======= ========= =========== ======= =========
Total (69.4) 0.8 (68.6) (13.5) 1.8 (11.7)
=============================== =========== ======= ========= =========== ======= =========
The nature of the adjusted items is as follows:
-- Share-based payments - The charge (2021: charge) relates to
share-based payments recorded in accordance with IFRS 2
'Share-based payment' of which GBP0.1m (2021: GBP1.1m) has been
classified within cost of sales in gross profit and GBP0.1m (2021:
GBP0.6m) has been classified as selling, general and administrative
expenses in operating profit. GBPnil cash has been defrayed in the
year (2021: GBP0.1m) in respect of employer social security
contributions following the exercise of unapproved employee share
options.
-- Chief Executive Officer recruitment - Chief Executive Officer
recruitment costs include the Chief Executive Officer's starting
bonus of GBP1.0m, of which GBP0.2m relates to a share-based award
and GBP0.8m relates to a cash award payable over the first three
years of employment, costs associated with the transition of the
former Chief Executive to a non-executive role and recruitment
fees. The charge of GBP0.2m (2021: GBP0.7m) includes share award
and cash costs associated with the new Chief Executive Officer's
starting bonus of GBP0.4m (2021: GBPnil), settlement costs and
legal fees of GBPnil (2021: GBP0.3m) associated with the transition
of the former Chief Executive Officer to a non-executive role and a
credit of GBP0.2m (2021: GBP0.4m fees) relating to external
recruitment fees. Cash costs defrayed in the period total GBP0.7m
(2021: GBP0.2m).
-- Restructuring - The charge of GBP4.2m (2021: GBP3.7m) relates
to restructuring costs associated with the announced closure of the
Group's manufacturing facility in Pennsylvania, USA and the closure
of the Group's manufacturing facility in Singapore.
- Restructuring charges of GBP1.2m (2021: GBP0.7m) relate to
employee related costs associated with the announced closure of the
Group's manufacturing facility in Pennsylvania, USA. The charge was
classified as selling, general and administrative expenses within
operating loss. Cash costs defrayed in the year total GBP0.6m
(2021: GBP0.3m).
- Restructuring charges of GBP3.0m (2021: GBP3.0m) consist of
employee related costs of GBP0.2m (2021: GBP1.5m),
site-decommissioning costs of GBP1.5m (2021: GBP1.5m), asset write
downs of GBP0.9m (2021: GBPnil) and asset transfer costs of GBP0.4m
(2021: GBPnil) relating to the announced closure of the Group's
manufacturing facility in Singapore. The charge was classified as
selling, general and administrative expenses within operating loss.
Cash costs defrayed in the year total GBP5.1m (2021: GBPnil).
- Restructuring profits on disposal of GBP1.3m (2021: GBPnil)
consist of the sale of assets in Singapore following the cessation
of trade in the year and the sale of assets in North Carolina to
facilitate the consolidation of the Group's manufacturing
operations from Pennsylvania. Proceeds received in the year total
GBP6.1m (2021: GBPnil) with a profit on disposal of GBP1.3m (2021:
GBPnil) classified within 'Profit on disposal of intangible assets
and property, plant and equipment'.
-- Impairment of goodwill - The non-cash charge of GBP62.7m
(2021: GBPnil) relates to impairment costs associated with the
Wireless CGU.
-- Impairment of other intangibles - The non-cash charge of
GBP3.4m (2021: GBP7.4m) relates to the impairment of certain
technology development costs and intellectual property patent
assets.
- The non-cash impairment charge of GBP3.4m relates to the
impairment of distributed feedback laser technology development
costs where the Group has taken the decision to discontinue the
development and commercialisation of the technology.
- The prior year non-cash impairment charge of GBP7.4m related
to the impairment of cREO(TM) filter technology development costs
and patent assets and the impairment of Photonic quasi crystal
technology related development cost where the Group had taken the
decision to pause development related activities which have not
recommenced in the current period given the lack of visibility over
the timeline to commercialisation of each of the technologies.
-- The cash impact of adjusted items in the consolidated cash
flow statement represent costs associated with the recruitment of
the group's new Chief Executive Officer (GBP0.7m), onerous contract
royalty payments related to the Group's cREO(TM) technology
(GBP0.4m), payment of employee related costs associated with the
announced closure of the Group's site in Pennsylvania (GBP0.6m) and
payment of employee and site related decommissioning costs
associated with the closure of the Group's manufacturing facility
in Singapore (GBP5.1m) net of the sale proceeds associated with
certain items of plant and equipment sold as part of the closure of
the Group's manufacturing facility in Singapore (GBP6.1m).
Adjusted EBITDA (adjusted earnings before interest, tax,
depreciation and amortisation) is calculated as follows:
2022 2021
GBPm GBPm
=========================================================== ====== ======
Loss attributable to equity shareholders (74.5) (31.0)
Finance costs 2.4 2.2
Tax (0.9) 8.8
Depreciation of property, plant and equipment 14.5 13.4
Depreciation of right of use assets 4.0 3.9
Amortisation of intangible fixed assets 7.8 8.0
Loss/(profit) on disposal of PPE and intangibles* 0.7 (0.1)
Adjusted Items 69.4 13.5
=========================================================== ====== ======
Share-based payments 0.2 1.7
Share-based payments - Chief Executive Officer recruitment 0.1 -
Chief Executive Officer recruitment 0.1 0.7
Restructuring 4.2 3.7
Restructuring - profit on disposal of PPE (1.3) -
Impairment of intangibles 66.1 7.4
=========================================================== ====== ======
Adjusted EBITDA 23.4 18.7
=========================================================== ====== ======
Adjusted EBITDA margin 14% 12%
=========================================================== ====== ======
*Excludes the adjustment 'Restructuring - profit on disposal of
PPE' which is separately disclosed as part of the groups adjusted
items.
5. Loss per share
Basic loss per share is calculated by dividing the loss
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the year.
Diluted loss per share is calculated by dividing the loss
attributable to ordinary shareholders by the weighted average
number of shares and the dilutive effect of '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.
The directors also present an adjusted earnings per share
measure which eliminates certain adjusted items. The Directors
believe that the adjusted earnings per share measure provides a
useful comparison of performance and allows management and other
stakeholders to better compare the performance of the Group between
the current and prior year, excluding the effects of certain
non-cash charges, non-operational items and significant infrequent
items that would distort period on period comparability. The
adjustments are detailed in note 4.
2022 2021
GBPm GBPm
==================================================== ============= =============
Loss attributable to ordinary shareholders (74.5) (31.0)
-------------
Adjustments to loss after tax (note 4) 68.6 11.7
==================================================== ============= =============
Adjusted loss attributable to ordinary shareholders (5.9) (19.3)
==================================================== ============= =============
2022 2021
Number Number
==================================================== ============= =============
Weighted average number of ordinary shares 804,466,357 801,653,662
Dilutive share options 8,797,413 4,097,303
==================================================== ============= =============
Adjusted weighted average number of ordinary shares 813,263,770 805,750,965
==================================================== ============= =============
Adjusted basic loss per share (0.74p) (2.41p)
Basic loss per share (9.27p) (3.87p)
Adjusted diluted loss per share (0.74p) (2.41p)
Diluted loss per share (9.27p) (3.87p)
==================================================== ============= =============
6. Cash generated from operations
2022 2021
Group GBPm GBPm
====================================================== ====== ======
Loss before tax (75.4) (22.2)
Finance costs 2.4 2.2
Depreciation of property, plant and equipment 14.5 13.4
Depreciation of right of use assets 4.0 3.9
Amortisation of intangible assets 7.8 8.0
Impairment of intangible assets 66.2 7.4
Impairment of PP&E - 0.1
Inventory write downs 2.8 0.8
Non-cash movement on trade receivable expected credit
losses 2.3 -
Non-cash provision movements 3.1 3.6
Profit on disposal of fixed assets (0.7) (0.1)
Share-based payments 0.3 1.7
====================================================== ====== ======
Cash inflow from operations before changes in working
capital 27.3 18.8
Increase in inventories (2.9) (1.3)
(Increase)/decrease in trade and other receivables (5.5) 2.9
Decrease in trade and other payables (3.9) (1.0)
Decrease in provisions (6.1) (0.5)
====================================================== ====== ======
Cash inflow from operations 8.9 18.9
====================================================== ====== ======
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2022
or 2021. The financial information for 2021 is derived from the
statutory accounts for 2021 which have been delivered to the
registrar of companies. The auditor has reported on the 2021
accounts; their report was (i) unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The statutory accounts for 2022 will be finalised on the basis
of the financial information presented by the directors in this
preliminary announcement, with the exception of the description of
going concern in the basis of preparation. In the absence of the
successful completion of the proposed equity fundraise launched at
the time of this announcement between the date of this announcement
and the authorisation of the financial statements, those statutory
accounts for 2022 are expected to include reference to a material
uncertainty relating to going concern and the auditor's report on
those accounts is expected to include reference to a matter to
which the auditor draws attention by way of emphasis without
qualifying their report in respect of that material uncertainty
related to going concern. Those statutory accounts will be
delivered to the registrar of companies in due course.
This information is provided by RNS, the news service of the
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END
FR FLFLREFIDLIV
(END) Dow Jones Newswires
May 17, 2023 12:19 ET (16:19 GMT)
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