Advanced wafer products maker IQE saw record second half revenues of £31.2m after rapid de-stocking in the firstSemiconductorhalf. Such a stark turnaround saw a £833,000 first half operating loss become a £3.4m profit between July-December. Net debt was cut from £18.1m to £14.9m, partly thanks to strong cash conversion.

IQE, whose semiconductor wafer products are used in mobile handsets, Wi-Fi and DVDs, among others, has benefited from volume hikes in smartphones as consumers rush for the latest gadget. 3G handsets typically use four or five times the number of Gallium Arsenide chips than the previous generation of handsets, says chief executive Drew Nelson.

IQE will continue to concentrate on high speed wireless communications markets which produce almost 80 per cent of sales and all operating profits. Opportunities in optoelectronics (converting light into electricity) also exist, such as Blu Ray technology and LEDs, while developments in renewable energy, such as ‘green’ CPV solar cells are on the cards.

The semi-conductor market seems to be turning for the better while outsourcing remains a major trend. IQE’s estimated 30 per cent share of an outsourcing market worth $600m (£370m) at the last count is very encouraging.

Panmure Gordon predicts adjusted pre-tax profit of £4.1m and EPS of 0.93p (£3.2m and 0.47p).

Undercover Columnist says:

These results underscore what a well run business IQE is but a 2010 PE just shy of 19 is a hefty rating in spite of the exciting growth potential. After a five-fold share price hike in a year, there’s no obvious catalyst for more in the short term.

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