7:59 cut – IQE

IQE – FY Profits warning

IQE warn that revenue will be about 7% below previous forecasts (with a fair probability that it will fall below their previous worst-case scenario), resulting in a loss even at the adjusted operating level. Debt continues to climb rapidly and it looks to me like another fundraising will be necessary in H2 2020.

Here is brokers consensus trend from Stockopedia:

The company acknowledge they are fighting it out amongst various competitors when they say:

Shortfalls in revenue relate predominantly to two major customers, with whom IQE is confident it has not lost share

Despite making money by riding the earlier hype-wave, I have consistently criticised this company on Stockopedia. While the management’s first mistake was to even get involved in such a difficult business, they have gone on to compound this with over-optimism leading to over-spending and over-investment. My view that academics often make poor business people (and, in particular, capital allocators) is reinforced every time I read the words “Dr Drew Nelson”.

The company may be effective in channelling grants from the Welsh government into local jobs, but the shares are not an investable proposition with current management in place.