- IQE reported annual pre-tax fell sharply as a slowdown in the semiconductor sector and a 'sudden disruption' in a highly significant supply chain hurt growth. The company also warned the ongoing softness in the semiconductor sector would dent first-half profits.

For the 12 months ended 31 December, pre-tax profits fell 43% to £14m and revenue gained just 1.1% to £156.3m. Earnings (EBITDA) fell 28.9% to £26.4m.

The company in January said it expected to post largely flat full-year revenue growth and lower earnings.

Wireless wafer revenues were up 7% to £97.8m and Infrared wafer revenues were up 10% to £13.1m but that was partially offset from weaker performance in its photonics segment.

Photonics revenues decreased 8.1% to £43.8m from £47.7m a year earlier amid a 'substantial' vertical cavity surface emitting laser (VCSEL) inventory correction in first half of the year 2018 and a 'sudden disruption' in a significant supply chain and reduction in demand for VCSELs in November, the company said.

Looking ahead, the company flagged short term headwinds, including the unwind of inventory levels in the VCSEL supply chain and the general market softness in the semiconductor industry and specifically in the mobile handset market.

'These headwinds will affect the revenues and profitability of the Group in the first half of FY19. The Board believes this is a temporary impact and there are strong signs that significant growth can be achieved in the second half of the FY19 and into FY20 in both the Group’s Photonics and Wireless business units,' the company said.

IQE expected to generate an adjusted operating margin of over 10% of revenues in 2019, but forecast operating profits to increase towards the end of 2019 and for 2020 and beyond due to 'the expanding revenue opportunity and the Group’s ability to drive industry leading production yield.'

'To fuel this growth, the Group continues to be committed to investing in capacity. Capital expenditure of about £40m will be spent in 2019 in order to ensure the growing revenue opportunities can be captured,' it added.

At 8:22am: [LON:IQE] IQE PLC share price was -1.97p at 81.43p

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