Annual Report and Accounts 2024
As the world’s leading compound
semiconductor supplier, IQE is at
the cutting edge of innovation
transforming our futures.
Our vision
Enabling a brighter future through the
power of advanced semiconductors.
Our mission
Our products are fundamental
in the technologies we use in
our everyday life. As leaders in
semiconductor materials innovation,
we are committed to responsibly
powering the next generation of
technology to drive society towards
a sustainable, Net Zero future. We
are enabling a global technology
revolution to create a connected,
safe and inclusive world.
Contents
1. Strategic Report
Our business at a glance
2
Powering innovation
4
Powering success
6
Powering the future
8
CEO statement
10
Executive Chair statement
14
Investment case
16
Business model
18
Market review
20
Our strategy
24
2024 performance review
28
Financial review
30
Stakeholder engagement
34
Responsible business
37
TCFD Report
50
Risk management
62
Viability statement
68
2. Governance Report
Board of Directors
70
Corporate Governance
72
Audit & Risk Committee Report
76
Nominations Committee Report
81
ESG Committee Report
82
Directors’ Remuneration Report
83
Directors’ Remuneration Policy
85
Directors’ Report
96
Statement of Directors’ responsibilities
98
Non-Financial and Sustainability
Information Statement
99
3. Financial Statements
Auditors Report
100
Financial Statements
108
Glossary
170
Investor information
172
Revenue
£118m
2023: £115m
Net operating loss
£(33)m
2023: £(26)m
Adjusted EBITDA
£8m
2023: £4m
Adjusted net debt
£(19)m
2023: £(2)m
Cash capital expenditure
£11m
2023: £12m
The nature and description of alternative performance measures
are included in Note 5 on page 135. Adjusted net debt is defined
on page 108.
IQE Annual Report and Accounts 2024
1
Strategic Report
Who we are
Our global footprint
+ Read more about our global success on page 6
Our business at a glance
IQE is the leading global manufacturer
of compound semiconductor wafer
products and advanced material
solutions. As the only epitaxy
provider with a global footprint, IQE
is strategically positioned with
operations on three continents.
We offer our customers world-class
technology, flexibility and supply
security within their local geographies.
Uniquely positioned in the global value chain
What we do
IQE provides compound
semiconductor manufacturing
services and occupies a critical
position in the global value chain
– at the forefront of advanced
semiconductor materials innovation.
We support next-generation
technologies and innovation by
providing our customers with epitaxial
wafers and substrates with the
advanced performance
characteristics needed to power
tomorrow’s technology, today.
Europe
America
Asia
Employees by location
479
Number of employees
(as at 31 December 2024)
We have a diverse workforce across three continents.
3
Countries of operation
Our unique global footprint allows IQE to offer
localised customer service.
2
IQE Annual Report and Accounts 2024
Our growth potential
+ Read more about our strategy for growth on page 24
High-performance connectivity is essential for
wireless communications products in today’s digital
world. With faster speeds, lower latency, and greater
reliability, these products enable seamless data
transmission, enabling applications in our homes,
workplaces and beyond, wherever efficient
communication is crucial for innovation and the
user experience.
The Power Electronics market is growing, driven by
the demand for energy-efficient solutions and the
shift to renewable energy. As electric vehicles, smart
grids and advanced power systems are adopted,
the need for high-performance power solutions
increases. Materials such as Gallium Nitride (GaN),
which is critical to IQE’s Power portfolio, are fuelling
innovations in semiconductors and energy
management to tackle global power-related
challenges and support sustainability and efficiency.
Display technologies are advancing rapidly, and as
demand for immersive visual experiences grows,
microLEDs are set to play a key role in the future of
displays. MicroLED displays offer superior brightness,
colour accuracy and energy efficiency and are ideal
for consumer electronics, automotive, and
advertising applications,. IQE, through collaboration
with key strategic partners, is advancing microLED
and display technologies to deliver an enhanced
user experience.
Growth is forecast in the global sensing market
driven by rising demand for smart devices, Internet
of Things and automation across industries like
healthcare, automotive, and manufacturing.
Advanced sensors enable real-time monitoring and
smarter decision-making, while AI and machine
learning provide further opportunities for market
expansion. As industries embrace digital
transformation, the need for connected solutions
continues to rise, with IQE leveraging its impressive
history in sense technologies including 3D Sensing.
Connect
Power
Display
Sense
Strategic Report
IQE Annual Report and Accounts 2024
3
Solving tomorrow’s challenges
Powering
innovation
IQE is addressing the technology challenges of
tomorrow through a market-led approach
Powering innovation
4
IQE Annual Report and Accounts 2024
Aligned with industry demand, IQE is
focused on three strategic markets which
offer significant growth potential.
Smart Connected Devices demand more efficient
and powerful semiconductors to handle complex
data processing and connectivity requirements. As
these devices become increasingly integrated into
everyday life, IQE’s innovation supports higher
performance, miniaturisation and energy efficiency.
The Automotive and Industrial sectors are expanding
rapidly as electric vehicles, autonomous driving
technologies and power systems demand advanced
semiconductors for better performance and safety.
IQE’s technology is enabling high-performance
sensing, connectivity, power solutions and real-time
data processing in these increasingly complex
applications.
Artificial intelligence is driving growth across a wide
variety of Communications Infrastructure and
Security applications by enabling faster data
processing and more efficient network management,
including for data centres, fibre networks as well as
the expansion of 5G/6G wireless infrastructure.
In the security space, IQE is enabling advanced
systems to support real-time threat detection and
unlocking new sensing potential.
Our growth
markets
Smart Connected Devices
Automotive and Industrial
Communications
Infrastructure and Security
+ Read more on page 20
IQE Annual Report and Accounts 2024
5
Strategic Report
Strategic Report
Uniquely positioned for
supply security and
scalability
North
America
Washington
Massachusetts
North Carolina
Newport
Cardiff
Milton Keynes
Taiwan
Europe
Asia
+ Read more about our Strategic Review in relation to IQE Taiwan on
page 27
Powering success
6
IQE Annual Report and Accounts 2024
Powering
success
Offering world-class technology, flexibility
and supply chain security
As the only pure play epitaxy provider with a global footprint, IQE remains uniquely positioned
within the global semiconductor ecosystem. Headquartered in the UK, IQE has manufacturing
operations on three major continents, providing our customers with broad market access,
close proximity and global manufacturing flexibility and resilience.
Combined with our proven ability to manufacture a full breadth of materials platforms at scale,
we are strategically placed to capitalise on the technology megatrends of the future.
+ Read more on page 16
IQE Annual Report and Accounts 2024
7
Strategic Report
Powering
the future
Powering the future
GaN technology promises to reduce power
consumption, increase reliability and
enhance performance in electric vehicles
and industrial applications, a cornerstone of
achieving Net Zero
8
IQE Annual Report and Accounts 2024
IQE’s GaN-led diversification strategy
in action
Gallium Nitride (GaN) remains at the forefront of
enabling smaller, more efficient and lower cost
power systems and it is employed across a wide
range of applications. Within electric vehicle and
automotive sectors, GaN is essential for
improving charging performance and increasing
vehicle range. It is also a critical enabler of
advanced communications system, such as
power supplies for data centres, thanks to its
performance advantages over traditional
silicon-based semiconductors. In the longer term,
GaN will be used to enable efficient ultra-high-
resolution displays (MicroLED).
Whilst the pace of vehicle electrification may
have slowed, as the market rebuilds critical mass
IQE is developing and qualifying customer power
architectures from its established foundry
locations. Thanks to strategic investment in GaN
reactor capacity across our global sites in the UK
and US, IQE is ready to respond to market
demand for GaN.
+ Read more on page 26
“IQE is strategically
positioned and ready to
respond to market
demand for GaN.”
Rodney Pelzel
Chief Technology Officer
& Chief Operating Officer
$2.2B
GaN Power device market
by 2029
41%
GaN Power device market CAGR
2023-2029
Source: Yole Group, 2024
IQE Annual Report and Accounts 2024
9
Strategic Report
Powering
tomorrow’s
technology,
today
I am delighted to present IQE’s 2024 Annual Report. As
I reflect upon my first year with the business, I am
filled with both pride and gratitude for what the
Company - and our teams - have accomplished in
2024. While we encountered some unexpected
challenges, it was also a year of opportunity and
growth for our organisation.
I joined IQE in January 2024 as the Company’s Chief
Financial Officer, bringing with me many decades of
experience working globally in senior roles in the
semiconductor industry. I was then fortunate to also
be appointed IQE’s Chief Executive Officer nine
months later in October 2024. Since then, I have been
working closely with Executive Chairman Mark Cubitt
and the Board as we focus on improving operational
efficiency and cost control to reshape IQE and
position ourselves for a successful future.
As we entered 2024 there was a weight of expectations
placed upon the rate of industry recovery following
the global semiconductor downturn. Although we
were beginning to see pockets of recovery, the pace
of progress was varying between regions and market
segments, with conditions not improving as
favourably or as quickly as we had hoped. This was in
large part due to weak consumer demand in end
markets and meant we did not achieve the revenue
growth we desired, with our year-on-year revenues
being broadly flat. Despite this, we began to see the
positive impacts of our careful cost management
and I am pleased to report an improvement in our
CEO statement
adjusted EBITDA position, which grew from £4,313,000
in 2023 to £8,112,000 in 2024.
With the market softness persisting throughout 2024,
we looked to maximise the value of IQE’s asset base
and stabilise our balance sheet. In July we
announced plans for the IPO of our Taiwan operating
subsidiary on the Taiwan Stock Exchange, which was
intended to accelerate investment in our growth
strategy. However, in November we subsequently
announced the Board’s decision to undertake a
Strategic Review of the Group in light of difficult
trading conditions and the Board’s belief that there is
significant value in IQE that is not currently reflected
in its market capitalisation. As part of the Strategic
Review, IQE has broadened its options in relation to
the proposed IPO to include the possibility of a full
sale. While the Strategic Review process remains
ongoing at the time of writing, I am encouraged by
the progress that has been made.
To strengthen IQE’s short-term liquidity position, in
November we announced that the business was
entering into subscription agreements with a
consortium of existing investors through convertible
loan note financing. This process, led by Lombard
Odier - IQE’s biggest shareholder - raised aggregate
subscription proceeds of £18 million and was finalised
after the reporting period. Simultaneously, IQE’s
existing financing facility with HSBC was amended
and restated with the closing of the fundraising.
Jutta Meier
Chief Executive Officer and Chief
Financial Officer
“I am filled with both pride and
gratitude for what the Company -
and our teams - have accomplished
in 2024.”
10
IQE Annual Report and Accounts 2024
Operational performance
The business achieved good progress against our
defend and diversify strategy in 2024. Our
connectivity-related products saw growth driven by
demand for communications infrastructure products,
penetration into the Android smartphone and WiFi
market, and increased demand in the Aerospace and
Security sector.
It has been a busy time within our Photonics portfolio,
with Generative AI driving demand across our new
and legacy photonics product portfolio, particularly
for next-generation data centres. We successfully
qualified Quantum Dot Laser products for an
industry-leading Silicon Photonics customer for use in
next-generation networking applications. Our
announcement of a strengthened partnership with
pioneering Quantum Dot Laser (QDL) technology
company Quintessent Inc., to establish the world's first
large-scale QDL supply chain highlights increasing
momentum in this emerging market. The business
also delivered advanced, higher performance VCSEL
products for qualification in new mobile platforms
which include AR/VR with high-resolution depth and
image recognition capabilities.
Throughout 2024, we continued to deploy GaN Power
capacity in the US and UK to serve the global Power
Electronics market. We saw successful customer
demonstration of 650V e/d-mode GaN products for
Tier 1 OEMs and received our first commercial orders
for 650v automotive qualifications. With tools
qualified and partnerships secured, IQE is positioned
to deliver on forthcoming GaN opportunities as the
market transitions into high-volume manufacturing.
We also expanded our capacity to serve the growing
demand for MicroLED development for next-
generation, high-resolution display markets. This was
supported by a new 8" GaAs and GaN RGB microLED
product portfolio announced during the year, with
strong engagement from Tier 1 consumer mobile and
display manufacturers. This included our continued
partnership with a leading smart glasses developer in
the field of GaN MicroLED displays.
Financial performance
Our full year revenue of £118,034,000
(2023: £115,252,000) increased 2.4% from 2023.
Wireless revenues, related to our connectivity-
related products, increased 24.9% to £67,295,000
(2023: £53,877,000), reflecting an increase in wireless
GaAs sales linked to a higher penetration of Asian
“The Board believes there is
significant value in IQE that
is not currently reflected in
its market capitalisation.”
markets and an increase in GaN sales for RF
applications. Photonics revenues, tied to our
advanced sensing portfolio, decreased 15.6% to
£49,876,000 (2023: £59,098,000) primarily because
of softness in the 3D Sensing and telecoms
infrastructure markets, partially offset by strong
performance in Aerospace and Security markets
for infrared-related products.
CMOS++ revenue of £863,000 (2023: £2,277,000)
declined 62.1%, reflecting a strategic rebalancing of
the business' product portfolio and a shift in focus
towards diversification into GaN Power and MicroLED.
Starting in 2025, the Group will no longer report
CMOS++ revenue as a standalone segment.
The Group reported an operating loss of £32,958,000
(2023: £25,779,000) which was impacted by certain
non-cash asset impairments primarily relating to our
Wireless business. However, we achieved an
improved adjusted EBITDA position through careful
cost management in year, in tandem with actions
taken in prior years. A positive EBITDA impact was
seen from the closure of our Pennsylvania site and
the consolidation of our US MBE business into North
Carolina. We also made the difficult decision to
restructure our management teams and reduce our
headcount by 10% in 2024, mainly focused within our
UK and US epiwafer sites.
ESG progress
IQE made important progress towards our ESG goals
in 2024. During the year we successfully attained
approval of our science-based targets to reduce
greenhouse gas emissions in line with the SBTi Net
Zero Standard, which seeks to limit global warming to
1.5°C. The SBTi’s Target Validation Team has classified
IQE’s near and long-term targets as in line with this
ambition and has verified IQE’s mitigation pathways
for reaching Net Zero by 2050 or sooner. We achieved
the most ambitious designation available through
the SBTi process and I am proud of our work towards
achieving meaningful global greenhouse
emissions cuts.
Strategic Report
IQE Annual Report and Accounts 2024
11
CEO statement continued
Outlook
In my first year with IQE, I have seen first hand how our
team unites to navigate uncertainty with steadfast
commitment. While the future of the Company
presents a variety of potential pathways, I remain
highly optimistic about what lies ahead. With our
short-term financing secured through the successful
completion of the CLN, and meaningful progress
towards the sale or IPO of IQE Taiwan, we are
establishing a solid financial foundation for a robust
and sustainable business.
I, together with the Board, believe there is a significant
market opportunity in IQE's core operations, and we
remain focused on reducing our cost structure for
profitable growth, servicing our customers and
maximising value for shareholders. We intend to
provide further updates and a refreshed strategy
later in the year.
We also have a strong customer pipeline in front of
us, which has never been more diverse. While the
industry remains in recovery, we are seeing strong
demand for data and optical communications
products, next-generation displays and advanced
sensing for aerospace and defence applications.
This is offsetting continuing softness in some larger
markets, such as the consumer mobile segment.
The strong engagements we are seeing in 2025 are
anticipated to provide significant growth
opportunities in 2026 and beyond.
I firmly believe that compound semiconductors, and
by extension IQE as leaders in the industry, will play an
important role in shaping the connected, immersive,
and low carbon world of tomorrow. The business has
made great strides this year and I am confident we
are laying the foundations for a new chapter in IQE’s
history that we can all be proud of.
Jutta Meier
Chief Executive Officer and Chief Financial Officer
12 May 2025
Revenue
£118m
2023: £115m
Operating loss
£(33)m
2023: £(26)m
Adjusted EBITDA
£8m
2023: £4m
The shape of our year
12
IQE Annual Report and Accounts 2024
CONTENT TBU
IQE Annual Report and Accounts 2024
13
Strategic Report
Unlocking
the potential
of IQE
I am pleased to be able to introduce my first Annual
Report as Executive Chair of IQE. Since joining the
business in October 2024 and stepping into the
Executive role shortly after, my first few months have
been spent getting to know IQE thoroughly and
meeting our dedicated global team.
Reflecting on 2024, it presented its fair share of both
challenges and opportunities for IQE, which tested our
resilience and agility. However, we also made
important strides to strengthen our operations and
position ourselves for future growth. Thanks to this
progress, we have a strengthened balance sheet,
streamlined management team and a reaffirmed
commitment to delivering value for our customers
and stakeholders, while progressing against our
longer-term strategy.
Trading performance
IQE’s 2024 trading performance was reflective of
ongoing softness within the industry and a slower
than anticipated recovery from the market downturn
in certain business segments. Our revenue
performance was broadly flat year-on-year, and
despite reporting an operating loss we demonstrated
an improved adjusted EBITDA as result of the cost
mitigation actions taken in year and earlier, reflecting
our focused cost control and improved operational
performance.
As part of our decisive action to manage costs, we
made the difficult decision to further reduce
headcount and restructure our executive team. We
also completed convertible loan note financing of
Executive Chair statement
£18m after the reporting period to strengthen our
near-term financial position.
Board matters
I was pleased to join IQE’s Board in October 2024 as a
Non-Executive Director. Following the departure of
CEO Americo Lemos later that month, I took up the
role of Executive Chair, with Jutta Meier being named
CEO in addition to her CFO role. Jutta originally joined
the business in January 2024, bringing a wealth of
experience from the global semiconductor industry
which we continue to benefit from.
Since then, we have been working closely together
and our strong focus is on cash generation and
management across the Group, and on unlocking
embedded value through our Strategic Review and
the optimisation of our asset base.
2024 also saw the departure of Drew Nelson and Phil
Smith from IQE’s Board. Since he co-founded the
business in 1988, Drew has been instrumental to the
business’ growth from start-up to a global innovator
and leader in the sector. He departed IQE’s Board in
June 2024 and remains a key figure in the
semiconductor industry through his work with the
South Wales Compound Semiconductor cluster,
where we continue to work closely with him.
Phil completed his Board tenure in December 2024
after serving on IQE’s Board for nearly nine years,
including five years as Chair. I wish him the best and
thank him for his contributions and support during
the transition period.
Mark Cubitt
Executive Chair
“We have a strengthened balance
sheet, streamlined management
team and a reaffirmed commitment
to delivering value for our customers
and stakeholders.”
14
IQE Annual Report and Accounts 2024
Looking ahead
While there is still much work for us ahead, I am
encouraged by the dedication of our teams and the
progress that we have made in 2024 to strengthen
our foundations for the future and adapt to the
evolving macro environment.
While the pace of recovery following the industry
downturn remains patchy, we welcome the gradual
stabilisation of supply chains and customer demand
across our product portfolio.
Our market-led technology approach will allow us to
capture opportunities in exciting new areas, and in
2025 we will look to build on our successful
development and customer engagement in key
markets such as GaN for Power Electronics and
MicroLED. We will also look to capitalise on AI-driven
demand in the communications infrastructure
market, particularly for data centres, AR/VR and
mobile platforms.
“The sale or IPO of IQE
Taiwan will pave the way
to unlock the incredible
potential of the IQE Group
by ensuring we have
a strong capital base
to continue investing
in our core business
and supporting our
longer-term strategy.”
I am confident that our Strategic Review and the sale
or IPO of IQE Taiwan will pave the way to unlock the
huge potential of the IQE Group by ensuring we have
a strong capital base to continue investing in our
core business and supporting our longer-term
strategy.
Moving forward, we are committed to building a
stronger IQE with a clear focus on innovation,
operational efficiency, cost control and sustainable
growth. I have full confidence in our team's ability to
navigate the challenges and opportunities ahead,
united by a common purpose to create a more
connected and sustainable future for everyone.
Mark Cubitt
Executive Chair
12 May 2025
Strategic
Review
In July 2024, IQE announced plans for an
initial public offering (IPO) of the Group’s
Taiwanese operating subsidiary, IQE
Taiwan, on the Taiwan Stock Exchange,
with the proceeds of the IPO intended to
be utilised across the Group to fund the
growth strategy. However, in November the
Board decided to undertake a
comprehensive Strategic Review of the
entirety of IQE’s asset base to ensure a
strong capital position from which to fund
investment into core operations. The Board
feels there is significant value in IQE which
is not currently reflected in its market
capitalisation, and the Board’s priority is
reducing the Company’s cost structure for
profitable growth, servicing its customers
and maximising value for shareholders.
At the time of publication, the Strategic
Review remains ongoing. As part of the
review, IQE broadened its options in
relation to the proposed IPO to include the
possibility of a full sale of IQE Taiwan. The
Board has retained Lazard to advise on the
Strategic Review and it is being overseen
by the Board with input from key
stakeholders.
The Board is encouraged by the positive
levels of interest in the process to date. The
completion of the Strategic Review and
potential sale or IPO of IQE Taiwan is a
significant opportunity which will allow the
Group to unlock significant unrealised
value within the business, strengthen the
balance sheet and ensure it is able to
invest in its long-term growth opportunity.
+ Read more about strategy on page 24
Strategic Report
IQE Annual Report and Accounts 2024
15
Investment case
Powering tomorrow’s
technology, today
Only global pure play
epitaxy supplier
We are strategically positioned with the
industry’s most comprehensive product
portfolio and a unique presence across
three continents. This enables us to provide
our customers with unmatched flexibility,
scalability and supply security to deliver
the world’s most advanced compound
semiconductor products.
1
Expansion capacity
and scalability
In a market with high barriers to entry,
we have a significant first mover advantage
to scale our operations to meet future
demand. We have the ability to expand in all
geographies within our current site footprint.
Market-led approach
We collaborate with our customers to develop
unique solutions to tackle market challenges,
leveraging our scalable materials platforms.
3
2
16
IQE Annual Report and Accounts 2024
Unmatched expertise
With more than thirty years of epitaxy
expertise , IQE has a proven history of
developing cutting-edge technology
underpinned by an unparalleled
intellectual property portfolio.
5
Foundational technology
Compound semiconductors are crucial for
powering an intelligently connected, immersive,
and low-carbon world, thanks to their
exceptional performance and efficiency.
4
Delivering value
We are dedicated to evolving
our business to prioritise sustainable
growth for the benefit of all our
stakeholders, including customers,
partners, employees, and shareholders.
6
IQE is the world’s leading compound semiconductor manufacturer, operating
at the forefront of materials innovation. We are solving the challenges of the
future by powering tomorrow’s technology, today.
IQE Annual Report and Accounts 2024
17
Strategic Report
Business model
Creating value through a
resilient business model
As the only pure play epitaxy provider with a global
footprint, IQE remains uniquely positioned within the
global semiconductor ecosystem.
Research & development
A programme of innovation that
drives leading edge technologies,
working in partnership with the world’s
major technological supply chains.
Customer qualification
Exacting quality standards, world-
leading IP and process know-how
enables broad product qualification
with leading international customers.
Product portfolio
A comprehensive Connect, Sense,
Power and Display product offering
enables our customers to deliver
world-leading products.
Manufacturing capacity at scale
Investment in the state-of-the-
art infrastructure of our global
manufacturing footprint has created
the scale required to capitalise
on the growing compound
semiconductor market.
What we do
How we do it
Our purpose
IQE manufactures the world’s most advanced compound semiconductor epitaxial wafers that are the
foundation materials for Connect, Sense, Power and Display devices. We enable our customers through rapid
innovation, superior quality and manufacturing scale.
Market intelligence
Unrivalled market understanding
underpinned by a 30+ year
pedigree and long-standing
customer relationships.
Epitaxy is where the value is created
Substrates
Base materials
Foundries
Device fabrication
Device makers
Device manufacture
Fabless
Design
Epilayers
are deposited
on a substrate
IQE IP
Reactor
Driven by:
18
IQE Annual Report and Accounts 2024
Our key relationships and resources
Delivering value for
Technology
Roadmap
+ Read more on page 20
Operational
Excellence
+ Read more on page 34
Sound
governance and
risk management
+ Read more on page 62
Responsible
business
operations
+ Read more on page 37
Our people
+ Read more on page 40
Long-standing partnerships with customers
IQE is a materials solutions provider, enabling
advanced technologies throughout major global
supply chains. We work with customers up and down
the value chain.
Technically experienced and highly-skilled
people
IQE attracts and develops the top talent in the
compound semiconductor industry, and is therefore
able to offer a wealth of technical expertise across
our product portfolio.
Strategically positioned intellectual property
portfolio
With a focused patent portfolio and unparalleled
process IP, IQE has an established, protected position
in its markets.
Widely recognised technology leadership
As a materials specialist with a commitment to
innovation, IQE is at the forefront of new technology
and has a track record of enabling major technological
product trends, from R&D to mass production.
Global manufacturing footprint
Headquartered in the UK with manufacturing operations
strategically positioned around the globe, IQE has
worldwide market access and close customer
proximity, providing resilient, flexible supply security
for customers.
Uncompromising quality standards
Superior quality is embedded in IQE’s manufacturing
processes to ensure that our products drive superior
yields and unit economics for our customers.
Customers
Employees
Investors
Communities
Environment
£2m
Technology-related development expenditure
2023: £3m
4,804
Hours of learning completed in 2024
2023: 1,528
£11m
Cash capital expenditure investment in 2024
2023: £12m
1 day
Annual paid employee volunteering leave entitlement
2023: 1 day
16,229 tCO2e
Total GHG emissions
2023: 19,603 tCO2e
Underpinned by:
IQE Annual Report and Accounts 2024
19
Strategic Report
Building the future
Market review
IQE is at the forefront of the megatrends shaping the future. In a rapidly
changing world, IQE’s diverse portfolio of products serves a broad range of
customers in multiple markets, providing customers with flexibility, opportunity
and supply resilience. Together we are building the energy efficient
infrastructure of the future, focusing on products which enable Artificial
Intelligence (AI), optical communications, advanced sensing and next-
generation displays.
20
IQE Annual Report and Accounts 2024
*
Source: Yole Group, 2024-2025
Communications
Infrastructure and Security
5G/6G
Intelligent sensing
5G networks play a crucial role in supporting and
driving the adoption of AI. High-speed, low-latency
networks are necessary to handle data-intensive
AI workloads. Sixth generation cellular networks will
enable ever present connectivity, providing the
bandwidth necessary to enable the Metaverse.
Multi-spectral imaging is delivering innovations in
sensing. Being able to see further, in higher
resolution and in full colour across the entire
infrared spectrum, is expanding use cases beyond
serving single missions.
How IQE is responding
IQE’s communications infrastructure product
portfolio serves customers at all network nodes.
Our GaN on SiC technology powers a new
generation of high-capacity 5G base stations,
delivering superior output power and energy
efficiency over incumbent radio frequency
solutions.
The optical backbone which connects wireless
networks is built on a metro and long-haul fibre,
and IQE provides a range of signal laser and
detector material solutions for data-centric
infrastructure transmitting over all Photonics
networks.
6G will be revolutionary, with unprecedented
requirements in data transmission, latency and
coverage. IQE’s broad RF materials portfolio (GaN,
InP and GaAs) enables us to serve customer
development platforms which are architecting
new 6G wireless networks.
How IQE is responding
IQE’s industry leadership in antimonide infrared
materials has continued to expand, with the
development of ‘full colour’ GaSb-based sensing
technologies which are enabling our customers to
expand not only their imaging reach, but also use
cases including AI-driven autonomous platforms.
Complementing our detector technologies are
intelligent mid-infrared lasers which can be tuned
to detect industrial and security hazards. We
expect sensing to become ever more prevalent as
use cases expand, with our intelligent sensing
product portfolio already enabling new
applications in consumer sensing.
.
$909m
RF GaN Telecom and Infrastructure Device Market
by 2029*
$1.5bn
Market size for advanced high-resolution Infrared
image sensors by 2030*
Strategic Report
IQE Annual Report and Accounts 2024
21
Smart Connected Devices
Augmented/Virtual
Reality
MicroLED displays
Healthcare wearables
An immersive user experience
across a vast array of use
cases is made possible by IQE’s
Photonics technologies. 3D
Sensing lasers powered by our
epitaxy are enabling new levels
of information and interactivity
to be unlocked.
Energy efficient, high-resolution
and flexible displays built
exclusively from compound
semiconductor-based
microLEDs are transforming the
display industry, and remains
an active area of development
for IQE.
A new era of digital healthcare
will be enabled by compound
semiconductor devices that
can detect biomarkers with
clinical accuracy to unlock
health insights live. These
sensors will be minaturised and
integrated into mobile
consumer platforms.
How IQE is responding
Building on our pioneering work
in 3D Sensing, IQE has
developed a new generation of
higher performance VCSELs
which deliver higher resolution
capabilities and enable
advanced applications.
IQE is working with global
leaders to provide the most
advanced VCSELs for AR/VR
applications and IQE’s material
is contained in current market
leading AR/VR products, as well
as in future development
roadmaps. This technology
development also extends to
spatial computing and smart
glass platforms, enabling the
next wave of mobile device
innovation.
How IQE is responding
IQE is partnering with industry
leaders to qualify microLED
technology for use in smart
glass and watch platforms. We
also have contracted R&D
programmes delivering RGB
epitaxy into display OEMs,
enabled by IQE’s breadth of
GaAs (red) and GaN (blue and
green) materials technology.
IQE is also engaged in scaling
microLED technologies and our
leadership in GaN-on-Si has
enabled us to deliver product
into OEMs developing mass
market solutions for consumer
displays.
How IQE is responding
IQE has long-standing
relationships with and remains
engaged with market leading
OEMs to develop advanced
healthcare wearables.
We offer our customers a wide
portfolio of materials and
wavelength solutions and 30+
years of engineering pedigree.
Consistent, customer-funded
R&D activity is ongoing, with
steady progress being made
towards enabling our
customers to develop
biomarker sensors which will
revolutionise how we track and
manage our health.
$1bn
GaAs VCSEL Mobile & Consumer
Die Market Demand by 2029*
$996m
MicroLED Total Panel Revenue
by 2029*
$100m
InP Consumer Wearable Sensing
Die Market Demand by 2029*
Market review continued
*
Source: Yole Group, 2024-2025
22
IQE Annual Report and Accounts 2024
Automotive and Industrial
Electric vehicles
Industrial power
Data communications
Vehicle electrification remains a
significant growth opportunity
within the GaN market,
specifically for onboard
charging modules. Critical
mass will build as energy
efficiency and EV expansion
drive the enhanced adoption of
GaN technology.
The growth of data centres
fuelled by AI has created a
significant growth opportunity
for Power GaN as it elevates the
performance and economic
returns of data centres by
reducing size, system costs and
increasing power efficiency. As
such, it is the ideal solution for
the improvements required to
concurrently meet AI demands
and Net Zero initiatives.
Rapid growth in AI data traffic
demands high performance
interconnectivity between
datacentre, clouds and wide-
area networks. Ultrafast
transceiver lasers and
detectors move data around
optical networks and the need
for energy efficiency is driving
the development of a new
generation of communication
laser solutions.
How IQE is responding
IQE has successfully completed
its GaN fleet expansion,
qualifying its final two new
reactors in 2024 at its Newport
site. IQE now has capacity to
service worldwide GaN Power
development at sites in both
the US and UK.
IQE has partnered with market-
leading customers to
successfully demonstrate 650 V
Automotive GaN Transistor
technology. Current activity is
focused on qualifying this
technology for full product
release, which will enable
access to a broad range of
high-efficiency, power
switching platforms.
How IQE is responding
Our position in the development
of GaN Power technology for
automotive markets provides a
foothold within this emerging
market and as such, IQE is
ideally positioned to address
this need with its newly added
capacity.
IQE is engaged with multiple
industrial partners who are
exploring our GaN transistor
technology and developing
industrial power supplies for
markets which include data
centres, 5G wireless access and
wireless power applications.
How IQE is responding
IQE’s optical communication
portfolio delivers into all network
nodes; GaAs VCSELs and InP
lasers drive data around the
datacentre fabric. We have also
launched a new technology for
this market, Quantum Dot
Lasers (QDLs), which deliver
substantial performance
advantages over incumbent
technologies, boosting
bandwidth, reducing latency
and improving efficiency,
enabling highly parallel dense
optical links for computing
clusters and data centres.
$336m
Automotive & Mobility Power GaN
Device Market by 2029*
$66m
Industrial Power GaN Device
Market by 2029*
$1.85bn
InP Datacom Die Market Demand
by 2029*
*
Source: Yole Group, 2024-2025
Strategic Report
IQE Annual Report and Accounts 2024
23
Our strategy
Strategic progress
Connect
Description
IQE has a well-established, market-leading product portfolio for Connect applications:
• GaAs-based HBT, BiFET, BiHEMT, and PHEMT epiwafers for mobile handset front-end modules
• GaN/SiC and GaN/Si RF epiwafers for base station applications
• GaAs and InP-based lasers and detector epiwafers for data/telecom transceivers
2024 focus:
• Retain market share for commoditised handset parts
• Grow front-end module market share within Asian supply chains
• Develop GaN/Si & SiC for RF infrastructure
• Develop GaAs-based quantum dot (QD) technology for data com lasers
Progress in 2024
• Strong qualification and sampling engagement with Asian front-end module customers
• Continued partnership with a leading US-based foundry on the development of GaN on Si for RF
applications
• Good execution on production orders for GaN on SiC RF products
• Strong engagement with InP-based datacom partners to service the resurging market and
develop next-generation technology
• Release of a quantum dot reference technology and secured contract revenue
2025 objectives
• Complete GaAs front-end module qualifications; pilot production expected to commence in 2025
• Leverage historic strength for GaN on SiC for RF to capture additional market share, particularly in
the UK and Europe
• Service re-emerging InP datacom market and qualify with customers for new AI applications
• Secure additional contract revenue for quantum dot products
Maintain and grow IQE’s position
IQE’s strategy is focused on maintaining share in existing markets while
diversifying into new growth areas. By collaborating with technology leaders
we will achieve sustainable growth in order to capture value.
24
IQE Annual Report and Accounts 2024
Sense
Description
IQE is a long-standing leader for two critical sense applications:
• GaAs-based VCSELs for 3D facial recognition systems in mobile handsets
• GaSb-based detectors for military applications
2024 focus:
• Retain market share for released 3D Sensing products
• Maximise revenue capture for GaSb-products through operational excellence and execution
against a strong order book
• Grow GaSb market share by developing and qualifying next-generation products
Progress in 2024
• Successfully serviced and retained GaAs VCSEL customers
• Excellent operational performance for MBE-based GaSb products underpinning significant
year-on-year revenue growth
• Good progress and strong customer engagement on GaSb development for next-generation
designs
2025 objectives
• Customers and market share focus within the 3D Sensing market
• Continue to grow the GaSb MBE business capitalising on increasing defence-based demand
IQE Annual Report and Accounts 2024
25
Strategic Report
Our strategy continued
Diversify
Power
Description
IQE is creating capability and capacity to serve the power market for automotive and industrial
applications with significant market growth anticipated due to global Net Zero initiatives.
2024 focus
• Install and run-up additional GaN capacity at sites in both the US and UK to create a secure,
global GaN footprint
• Develop a market-leading 200 mm 650 V e/d mode capability
Progress in 2024
• Successfully installed and ran-up two new reactors at the Newport site
• Completed the internal qualification of two new reactors at the Massachusetts site and began
servicing customer orders
• Significant progress made on GaN power product development; demonstrated 650 V breakdown
with excellent wafer flatness and defectivity
• Sampled multiple power customers to qualify for 650 V applications
2025 objectives
• Fully qualify a reference 650 V e/d technology
• Qualify with multiple Tier 1 GaN/Si power customers/foundries
• Develop technology for higher and lower voltage nodes
26
IQE Annual Report and Accounts 2024
Display
Description
Small form factor, ultra-high resolution, highly efficient displays for AR/VR applications and
wearable/mobile devices will ultimately require the use of red, green, and blue (RGB) microLEDs. IQE
is developing leading edge technology to intersect with this significant market opportunity. Green
and blue technology development leverages IQE’s established GaN on Si expertise. For red, IQE has a
dual path, developing a GaAs/Ge-based technology for initial adoption and GaN on Si for
subsequent generations.
2024 focus
• Develop baseline blue and green GaN on Si technology
• Demonstrate GaAs/Ge-based red technology
• Capture development revenue through close partnership with market leaders
Progress in 2024
• Rapidly developed a baseline blue and green GaN on Si capability that has resulted in strong Tier 1
customer engagements
• Demonstrated a viable red technology on GaAs resulting in requests for qualification samples by
multiple customers and partners
• Captured customer NRE revenue to offset internal development costs
2025 objectives
• Continue RGB development to demonstrate state of the art performance
• Secure additional NRE arrangements to monetise R&D activity
In July 2024, IQE announced the planned initial public offering (‘IPO’) of the Group’s Taiwanese
operating subsidiary (‘IQE Taiwan’) on the Taiwan Stock Exchange. This was followed by a further
announcement in November 2024 that the Group will be conducting a comprehensive Strategic
Review of its asset base to ensure a strong capital position to further invest in core operations.
The Strategic Review has allowed IQE to broaden its options in relation to the proposed IPO to include
all strategic options, including a full sale. The Board believes there is a significant market opportunity in
IQE's core operations and remains focused on reducing its cost structure for profitable growth,
servicing its customers and maximising value for shareholders.
At the time of publication, the Strategic Review process remains ongoing and further updates will be
provided to the market when appropriate.
Strategic Review
+ Read more about our Strategic Review in the Executive Chair’s statement on page 14
IQE Annual Report and Accounts 2024
27
Strategic Report
Key performance indicators
Financial highlights
2024 performance
review
Operating loss
(£’m)
Adjusted operating
profit/(loss)*
(£’m)
Property, plant and
equipment cash
expenditure
(£’m)
2023
2020
2021
2022
2024
15
5
9
12
11
2023
2020
2021
2022
2024
(20)
(6)
(73)
(26)
(33)
2023
2020
2021
2022
2024
(6)
5
(4)
(20)
(18)
Revenue
(£’m)
Adjusted EBITDA*
(£’m)
2023
2020
2021
2022
2024
154
178
167
115
118
2023
2020
2021
2022
2024
23
19
30
4
8
2023
2020
2021
2022
2024
(6)
2
(15)
(2)
(19)
Adjusted net
cash/(debt)**
(£’m)
*
The nature and description of alternative performance measures are included in Note 5 on pages 135 to 138.
*
*
Adjusted net debt is defined on page 108.
**
*
The nature of adjusted diluted EPS is referenced in Note 12 on page 143.
28
IQE Annual Report and Accounts 2024
Diluted EPS
(£’p)
Total GHG emissions
(tCO2e)
Total online learning
hours
*
Read more in our Responsible business section from page 37.
2022
2023 2024
22,180
19,603
16,229
2022
2023 2024
4,804
1,528
2,064
2023
2020
2021
2022
2024
(3.87)
(0.41)
(9.27)
(3.96)
(3.28)
Non-financial highlights
2022
2023 2024
3,669
5,305
2,939
Gender diversity
Group level*
Safety course
completions
2023
2020
2021
2022
2024
0.29
(2.41)
(0.74)
(2.68)
(2.46)
17%
17%
Female
Male
2022
2024
83%
83%
2023
82%
18%
Adjusted diluted EPS
(£’p)***
Our success is dependent upon our financial
performance and also operating in a manner
which promotes wellbeing for our employees
and the communities in which we operate.
Strategic Report
IQE Annual Report and Accounts 2024
29
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 5 to the financial statements.
Review of Year
The Group’s trading performance in 2024 remained
subdued as the Group continues to experience weak
customer demand and low customer orders
following the global semiconductor industry
downturn. Market recovery has been slower than
anticipated in key sectors, driven primarily by weak
consumer demand in end markets. The continuation
of weak customer demand, resulting in revenue that
has remained broadly flat year-on-year at
£118,034,000 (2023: £115,252,000) has presented a
significant challenge to the business, with the Group
reporting an operating loss of £32,958,000
(2023: £25,779,000).
The Group’s trading performance, combined with a
slower than anticipated recovery in key market
sectors has prompted the Directors to initiate a
Strategic Review and take immediate actions to
secure short-term financing to strengthen the
Group’s liquidity.
Financial
review
Short-term liquidity and funding actions include the
formal waiver obtained pre-year end from HSBC Bank
plc of the 31 December 2024 financial covenant tests
applicable to the Group’s £28,000,000 multi-currency
revolving credit facility (‘RCF’), the successful
negotiation of a Deed of Amendment and
Restatement to the RCF on 10 March 2025 to amend
applicable financial covenants and, the successful
£18,000,000 convertible loan note fund raise
completed on 10 March 2025, to provide the Group
with additional short-term liquidity whilst the Directors
complete their Strategic Review.
The Directors, as part of the Strategic Review, plan to
raise sufficient cash from the divestment of Group
assets to repay the Group’s RCF and the convertible
loan notes and ensure that the Group has a strong
capital position to further invest in its core operations.
In the first instance, this plan includes divestment
options for an IPO or sale of the Group’s Taiwan
operations and a comprehensive strategic review of
all other Group assets and operations
Group revenue of £118,034,000 (2023: £115,252,000) has
remained depressed increasing 2.4% from 2023 with
the Group’s wireless business segment representing
the largest proportion of Group revenue at 57.0%
(2023: 46.7%) of total revenue with Photonics
representing 42.3% (2023: 51.3%) and CMOS++
representing 0.7% (2023: 2.0%).
Wireless wafer revenues increased 24.9% to
£67,295,000 (2023: £53,877,000), reflecting an increase
in wireless GaAs epi-wafer sales linked to higher
Jutta Meier
Chief Executive Officer & Chief
Financial Officer
“The Group’s trading performance in
2024 remained subdued...following
the global semiconductor industry
downturn. Market recovery has been
slower than anticipated in key
sectors, driven primarily by weak
consumer demand in end markets.”
30
IQE Annual Report and Accounts 2024
penetration of Asian markets and an increase in GaN
epi-wafer sales for 5G infrastructure. Photonics wafer
revenues decreased 15.6% to £49,876,000
(2023: £59,098,000). The decrease in photonics wafer
revenues primarily reflects the softness in 3D sensing
and telecoms infrastructure markets partially offset
by strong performance in aerospace and security
markets for infrared related products.
Statutory gross profit increased from £2,328,000 to
£4,446,000. The increase in gross profit reflects a
combination of the increase in sales, the annualised
impact of cost mitigations actions implemented in
2023, and the impact of cost control actions
implemented during the current year.
Selling, general and administrative (‘SG&A’) expenses
have decreased 7.7% in the year from £32,486,000 to
£29,982,000, excluding the separately disclosed
impairment losses on intangible assets of £3,772,000
(2023: £nil) and on property, plant and equipment
and right of use assets of £4,646,000 (2023: £nil).
Intangible and tangible asset impairment relates to a
combination of asset impairments linked to the
Group’s US related wireless assets, the discontinued
development and commercialisation of the Group’s
Dilute Nitride technology and the impairment of
certain property, plant and equipment related to the
restructuring of the Group’s US manufacturing
operations. Adjusted SG&A expenses, which exclude
adjustments for share-based payments, Chief
Executive Officer recruitment costs, Chief Executive
Officer severance and restructuring costs have
decreased from £26,167,000 to £24,109,000 (7.9%),
primarily reflecting a combination of the annualised
impact of labour cost and discretionary expenditure
savings implemented in 2023 and the impact of
additional actions to continue to mitigate cost during
the current year.
Cost rationalisation actions include a combination of
the optimisation of manufacturing asset utilisation,
including idling reactors to reduce cost and align
capacity with lower customer volumes, consolidation
of the Group’s US molecular beam epitaxy (‘MBE’)
manufacturing capacity, including closure of the
Group’s manufacturing facility in Pennsylvania and
the strategic re-positioning of the Massachusetts and
North Carolina manufacturing sites, commencement
of the consolidation of the Group’s South Wales
activities into its Newport manufacturing site,
restructuring of the Executive Leadership Team
following departure of the Chief Executive Officer and
the implementation of a range of cost control
measures in areas including travel, marketing, legal
and professional.
As part of the cost rationalisation and global footprint
optimisation plan, restructuring costs totalling
£7,638,000 (2023: £4,680,000) have been incurred
relating to a combination of employee redundancy
and severance costs of £974,000 (2023: £3,079,000),
site decommissioning costs of £1,912,000
(2023: £1,601,000), Taiwanese site divesture and
Singapore site closure costs of £136,000 (2023: £nil)
and non-cash intangible development cost and
tangible property, plant and equipment asset
impairments of £5,352,000 (2023: £nil), partially offset
by a profit on sale of assets of £735,000 (2023: £nil)
which includes the sale of the Group’s former
Pennsylvania manufacturing site for £4,061,000
(2023: £nil). Other significant infrequent costs incurred
in the year relate to the new starter bonus, payable
over three years, for the former Chief Executive Officer
and severance costs following the departure of the
former Chief Executive Officer on 29 October 2024.
A reported operating loss of £32,958,000 has been
incurred (2023: £25,779,000) with the 2024 operating
loss impacted by non-cash asset impairments of
£8,418,000. An adjusted operating loss of £18,357,000
in 2024 compares to an adjusted operating loss of
£20,199,000 in 2023. The decrease in the adjusted
operating loss reflects a combination of the increase
in sales and the impact of cost mitigation actions
implemented in 2023 and 2024. The segmental
analysis in Note 4 sets out the operating and adjusted
operating profits attributable to the wireless segment,
operating and adjusted operating losses attributable
to the photonics and CMOSS segments and the
associated adjusted operating margins for each
segment (before central corporate support costs).
Wireless adjusted operating margins increased from
8.6% in 2023 to 9.7% in 2024, primarily reflecting a
combination of an increase in manufacturing asset
utilisation, particularly at the Group’s Taiwanese
manufacturing site and the positive cost impact of
the completion of the consolidation of the Group’s US
molecular beam epitaxy (‘MBE’) manufacturing
capacity into the North Carolina site. Photonics
adjusted operating margins remained negative at
21.2%, decreasing from negative 16.9% in 2023 as the
market recovery in certain photonics market
segments has remained depressed with the Group
continuing to suffer from significant under-utilisation
of capacity at its South Wales sites.
Finance costs of £3,947,000 (2023: £3,032,000) reflect
£2,293,000 (2023: £1,810,000) of bank and other
interest costs and the interest expense on lease
liabilities of £1,654,000 (2023: £1,222,000). Bank and
other interest costs principally relate to the Group’s
HSBC Bank plc revolving credit facility with the
increase in interest cost reflecting higher levels of
facility utilisation and borrowing in 2024.
The tax charge of £1,273,000 (2023: £567,000) consists
of a current tax charge of £1,106,000 (2023: £1,112,000)
primarily relating to taxable profits generated by the
Group’s Taiwanese operations. Deferred tax asset
recognition has been restricted in the UK and US to
reflect future forecast profitability, an assessment
that includes the impact of the continuation of weak
customer demand as market recovery is forecast to
remain subdued in certain key sectors following the
global semiconductor industry downturn. As a result,
lower utilisation of UK and US deferred tax assets is
projected, which has restricted the ability to
recognise deferred tax assets for current year losses.
The effective tax rate of 1.1% (2023: 3.4%) applicable to
the tax charge of £157,000 (2023: £192,000) on
adjusted items is less than the UK statutory tax rate of
Strategic Report
IQE Annual Report and Accounts 2024
31
Financial review continued
25% primarily due to the non-recognition of deferred
tax assets for current year UK and US trading losses
which include the adjusted Chief Executive Officer
recruitment costs, Chief Executive Officer severance
costs and restructuring costs.
The increase in the loss for the year to £38,178,000
(2023: £29,378,000) principally reflects the impact of
adjusted items which include the non-cash impact of
£8,418,000 (2023: £nil) of asset impairments. At an
adjusted level, the loss for the year remained broadly
flat year-on-year at £23,734,000 (2023: £23,990,000).
Basic and diluted loss per share has increased from a
loss per share of 3.28p to a loss per share of 3.96p in
the current year with adjusted basic and diluted loss
per share of 2.46p (2023: 2.68p) reflecting the Group’s
loss at a statutory and adjusted profit level.
Cash generated from operations decreased in the
year to £1,282,000 (2023: £10,074,000), principally
reflecting the impact of working capital in a year
when the business has experienced limited growth.
The outflow in working capital of £3,768,000 required
to support the low levels of growth compares to a
significant inflow in working capital of £10,882,000
experienced in 2023 when the size of the business
contracted significantly, which, combined with strong
working capital management, particularly in the
areas of inventory and trade receivables delivered
the favourable working capital inflow. The Group has
continued to invest in capacity to diversify into
high-growth markets with capital expenditure of
£11,359,000 (2023: £12,158,000) principally focused on
Gallium Nitride related manufacturing capacity,
enabling diversification into the high-growth power
electronics and advanced display (uLED) markets,
intangible asset expenditure of £1,609,000
(2023: £3,113,000) 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 £1,877,000 (2023: £2,852,000) primarily
related to Gallium Nitride technology development.
The decrease in cash generated from operations,
combined with investing activity cash costs of
£10,194,000 (2023: £17,960,000), repayment of lease
liabilities of £3,470,000 (2023: £4,787,000) and net
increases in bank borrowings of £15,445,000
(2023: £18,431,000 repayment) have combined to
maintain the Group’s cash position at £4,660,000
(2023: £5,617,000) but resulted in an increase in net
debt (excluding lease liabilities and derivative
financial instruments) from £2,228,000 to £18,800,000
as at 31 December 2024.
Equity shareholder funds total £134,110,000
(2023: £169,785,000) with the movement from 2023
primarily reflecting the loss for the year.
Jutta Meier
Chief Executive Officer and Chief Financial Officer
12 May 2025
32
IQE Annual Report and Accounts 2024
Strategic Report
IQE Annual Report and Accounts 2024
33
Stakeholder engagement
Our impact on, and engagement with, our key
stakeholder groups is considered within the
implementation of our strategy, which is overseen by
the Executive Leadership Team and supported by the
Board of Directors. We consider the impact we have
on our stakeholders, as well as what our stakeholders
consider important when developing IQE’s strategies
for future success. Engagement with our stakeholders
allows us to grow and execute our strategy and we
have used a range of engagement mechanisms to
How the Board has engaged with shareholders, the workforce and other stakeholders:
Stakeholder
Stakeholder description
Material issues
How we engage
Customers
We provide the best advanced
compound semiconductor
materials solutions to our
customers, supported by
bespoke product offerings and
personalised customer support.
We have a wide and diverse
range of customers serving end
applications aligned with our
core markets of Connect, Sense,
Power & Display.
• Consistently high-quality
products, technical
expertise and continuous
improvement
• High standard of
business conduct
• Continuous improvement
• Fair pricing
• Excellent ongoing
customer support
• Continuity of supply
• The Executive Leadership
Team and other senior
management frequently host
and attend meetings with key
customers around the world,
both virtually and in person.
These meetings provide
management with meaningful
opportunities to understand
first hand, at a senior level of
the organisation, how we can
enhance our offering to
customers by understanding
their current and future needs.
• The CEO and other members
of the Executive Leadership
Team provide the Board with
feedback and trends from
these meetings.
Tom Dale
Chief People Officer & General Counsel
Consistent
engagement
It is important that we continue to
engage with all of our stakeholders
as we progress our strategic goals
and plans for continued success.
understand and consider our stakeholders’ views.
Whilst the Board engages with certain stakeholders
directly, there is also significant engagement by
senior management and throughout IQE.
We have set out below our key groups of
stakeholders, the issues and factors relevant to those
stakeholders and how we have engaged with those
stakeholders over the past year.
34
IQE Annual Report and Accounts 2024
Stakeholder
Stakeholder description
Material issues
How we engage
Employees
Our employees are fundamental
to our business success. We
have a responsibility to support
their health, wellbeing and
development at IQE. A highly
capable and diverse workforce
will also enable us to better
understand our customers and
markets. We aim to continually
invest in our people, developing
the capabilities that we will need
to succeed over the longer term.
We are committed to becoming
the company where the best in
our sector want to work and
strive to offer opportunities that
will attract, motivate and retain
a diverse pool of talented
employees, enabling them to
give their best.
• Opportunities for
personal development
and career
progression
• Trust and
encouragement to
contribute to the
success of the
business
• Consideration of their
health, safety and
wellbeing
• Working as part of an
equitable, inclusive
and diverse culture
• Clarity of expectation
on how recognition
and remuneration
structures align with
accountabilities
• The Board engaged with a broad
range of employees throughout
the year through informal
site-based meetings and from
feedback provided to the
directors responsible for
employee engagement.
• The CEO and wider ELT host
regular all-employee Town halls
and site-based all-hands
meetings to proactively engage
with our people.
• We continue to promote our ‘Zero
is possible’ health and safety
programme.
Investors and
Shareholders
We place considerable
importance on the maintenance
of regular and open dialogue
with our shareholders. Our goal
is to deliver returns to our
investors and shareholders
through profitable and
sustainable growth with the
efficient use of capital. Our
investors and shareholders are
also key contributors in the
formation of our sustainability
agenda.
• Current and future
financial performance
• Maximising
opportunities for
growth
• We actively engage with
shareholders throughout the year
to ensure they understand the
performance of our business. Our
ongoing programme includes
numerous shareholder meetings
and roadshows, which are
facilitated alongside our full and
half year results.
• The Chair, Remuneration
Committee Chair, and CEO all
directly engaged with a range of
shareholders on key topics
including the Group’s financial
performance, strategy and
Executive Director Remuneration.
• Virtual meetings were held with
our largest shareholders to
understand their priorities for the
Group’s sustainability agenda.
Partners and
Suppliers
Our supply chain plays a vital
role in supporting our products
and broader business strategy
and we recognise the value of
our partners and suppliers. To
meet the expectations of our
customers, we develop strong
working relationships with our
suppliers and look for our suppliers
to provide excellent, consistent
quality and added value.
Engaging with our supply chain
is also crucial in the development
and delivery of our Net Zero
commitment and SBTi targets.
• Forecasting visibility
• Product quality
• Fair pricing
• Long-term
partnerships
• The Board received regular
updates throughout the year
regarding industry-wide supply
chain challenges and the
ongoing work to mitigate the
impacts of these challenges.
• Our Executive Leadership Team
and other senior managers work
closely with our supply chain
partners to involve them in our
planning processes and
alignment with our strategy.
Society
We believe that our technology
and products will benefit and
advance society and provide a
positive impact on the world’s
sustainability. We work hard to
ensure that we have a positive
impact on all those around us.
• Opportunities for local
investment
• Impact on local and
wider environmental
and social issues
• We use market data and insights
to develop new products which
will bring benefits to society.
• Our ESG Committee has
oversight of the Group’s
sustainability agenda and is
focused on developing the
Group’s approach to climate
change, amongst other things.
Strategic Report
IQE Annual Report and Accounts 2024
35
Section 172(1) statement
Engaging with our stakeholders and acting in a way
that promotes the long-term success of the Group,
while considering the impacts of our business decisions
on our stakeholders, is central to our strategic
thinking and our statutory duty in accordance
with Section 172(1) of the Companies Act 2006. This
constitutes our Section 172 Statement as required
under the Companies (Miscellaneous Reporting)
Regulations 2018.
The Board of Directors considers, both individually
and collectively, that it has acted in a way that it
considers, in good faith, would be most likely to
promote the success of the Company for the benefit
of its members as a whole, having regard to the
matters set out in Section 172 (a) to (f), in the
decisions taken during the year.
Recognising that companies are run for the benefit
of their shareholders, but that the long-term success
of a business is dependent on maintaining relationships
with stakeholders, the Board continuously reviews
which relationships support the generation and
preservation of value in the Company. These
relationships include those with our customers,
employees, investors and shareholders, partners and
suppliers and society.
As a Board, our intention is to behave responsibly and
ethically at all times, in line with our Company values,
and to ensure that our management teams operate
the business in a responsible manner and to the
highest standards of business conduct and good
governance. As we act in a way which reflects our
values, we will contribute to the long-term success of
the Company and continue to develop our reputation
as a responsible and successful Company that
delivers stakeholder value.
Further information as to how the Board has had regard to the Section 172 factors:
Section 172 Factor
Key Examples
Page
A. Consequences of any
decision in the long term
• Consideration of how IQE generates long-term value through
the development of our Business Model and Strategy
• Risk management
Page 18
Page 24
Page 62
B. Interests of employees
• Participation in Diversity, Equity and Inclusion planning for the
business
• Promotion of employee wellbeing initiatives and benefits
awareness
• Participation in Town Halls and employee forums
• Sustainability
Page 41
C. Fostering business
relationships with
suppliers, customers
and others
• Building strong relationships with customers and suppliers
within the Group’s supply chain, which is essential for
achieving the Group’s long-term strategic goals
Page 38
D. Impact of operations on
the community and the
environment
• Consideration of Environmental, Social and Governance
improvement strategies
• Review of environmental performance, ISO 14001 Environmental
management system and emission reduction initiatives
• Sustainability
Page 45
E. Maintaining high
standards of business
conduct
• Promotion of responsible business operations, with a focus on
the Group’s Anti-bribery and Corruption, Confidentiality and
Whistleblowing policies, and Anti-Slavery Statement
Page 39
F. Acting fairly between
members of the Company
• Shareholder engagement
• Investor information and the Annual General Meeting
Page 35
Stakeholder engagement continued
36
IQE Annual Report and Accounts 2024
Responsible business
approach and priorities
Through 2023 and early 2024 we conducted a formal
materiality assessment to ensure we had a wide
range of stakeholder views to inform our prioritisation
of the sustainability issues with the greatest impact
on our business, communities and the environment.
We expect to refresh the materiality assessment in
2026.
The materiality assessment was developed through
several steps using a third party to ensure a thorough
approach. We initially used a desktop survey as a
pre-assessment to determine the key issues in
current corporate reporting. We used that initial
assessment as the basis for engaging a range of
stakeholders, starting with interactive sessions with
our global leadership team, site-based workshops
A matrix of materiality impacts
LEVEL OF IMPORTANCE TO STAKEHOLDERS
LOWER
HIGH
IMPORTANT
MATERIAL
PRIORITY
LEVEL OF BUSINESS IMPACT
LOWER
HIGH
Reduction of energy usage
and greenhouse gases
Strong and effective
communication
Efficient use of resources
Achieving
Net Zero
Waste reduction
and recycling
and interviews with our major shareholders. We then
used feedback from our customers and suppliers,
through their own corporate reporting and requests
or surveys to IQE, before reviewing the combined
feedback with our Executive Leadership Team
and the ESG Committee.
Once identified, the material issues were plotted
on our materiality matrix and assessed against the
level of business impact* and level of concern to
stakeholders. A copy of the final materiality matrix
is shown below.
We will prioritise our efforts against the items towards
the top right hand corner of the matrix.
Employee’s mental
health and wellbeing
Employee
engagement
Employee training and development
Diversity, Equity and Inclusion
Engagement with
the communities in
which we operate
Culture
10
11
Effective health
and safety
management
12
Responsible sourcing
13
4
3
Supply chain management and auditing
14
7
2
8
Human Rights and commitments to preventing Modern Slavery
15
Zero tolerance approach to bribery and corruption
16
Cyber and data security
17
9
6
5
1
Effective stakeholder
management
18
Responsible approach to tax
19
Whistleblowing
20
Environment
Social
Governance
Responsible business
*
Impact on IQE’s ability to create economic, environmental
and social value.
Strategic Report
IQE Annual Report and Accounts 2024
37
Responsible business continued
As part of our proud Science-Based Targets initiative
(SBTi) commitment to Net Zero, IQE is working closely
with our supply chain partners supporting the
transition to cleaner manufacturing methods,
particularly for our bulk gases. The Company is
progressing closer to having all bulk gases produced
from processes that generate zero emissions,
aligning IQE plans to scale responsibly in the future.
Anti-bribery and corruption
IQE maintains a zero-tolerance approach to bribery
and corruption. We have an established Anti-bribery
and Corruption Policy, which includes guidance on
the giving and receiving of gifts and hospitality. A
Gifts and Hospitality Register is also maintained to
ensure transparency. Our policies are supported by
regular employee training.
The key principles we expect everyone to follow
include not offering or accepting bribes or improper
payments; not improperly influencing any individual;
and not participating in any kind of corrupt business
activity, either directly or through a third party.
Third-party agents and distributors are subject to
additional due diligence checks.
Trade compliance
We have policies and processes to ensure we do
business in accordance with all applicable trade
compliance laws. Our policies and processes are
standardised where possible and are regularly
audited by our specialist trade compliance team. We
engage regularly with relevant government bodies in
the UK and US, and their equivalents in other
jurisdictions. IQE’s proactive response to geopolitical
shifts in recent years has positioned the Group
positively to benefit from diverging supply chains.
Our suppliers share a commitment to responsible
sourcing practices which is more important now than
ever. They are key partners and continue to play a
critical role in helping us achieve our vision and goals.
We expect our supply chain partners to uphold the
same high standards as IQE leaders and employees,
and always to act in an ethical, efficient and
transparent manner.
IQE partners with over 100 direct suppliers to identify
and address potential areas of risk in our supply
chain. Risks may include physical impacts of climate
change, geopolitical impacts, or risks that threaten
our suppliers’ ability to conduct business. To further
enhance our risk capability, we have a comprehensive
third-party partner who assists IQE to continuously
assess these risks within our supply base.
2024 supply chain review
It was a very dynamic 12 months within IQE’s supply
chain, with 2024 continuing to bring complexities and
challenges. During the year China, announced further
restrictions on the export of Gallium and Antimony,
both of which are key components in compound
semiconductor manufacturing. Thankfully, our
strategy to strengthen the recycling of such materials
over the past few years means that a significant
portion of the Gallium IQE consumes now comes from
recycled sources in addition to qualifying new
sources, whilst our Antimony is already sourced
outside of Asia.
IQE is committed to advancing a circular economy,
focusing on increasing recycling and reuse of waste,
while ensuring that our raw materials are produced in
the most eco-friendly way. In 2024, we maintained a
100% recycling rate for all our Gallium Arsenide (GaAs)
and Indium Phosphide (InP) wafer waste,
transforming it back into high-purity raw materials
that are reintegrated directly into our supply chains.
David Bishop
Head of Global Supply Chain
Supply chain
The scale of IQE’s business and our
global supply chain means we are
committed to sourcing responsibly.
We partner with our suppliers to
implement rigorous standards that
safeguard the health and safety of
our people and communities.
38
IQE Annual Report and Accounts 2024
Inside information and share dealing
We take steps to ensure our compliance with the
obligations arising from the AIM Rules, Disclosure and
Transparency Rules (where applicable) and the UK
Market Abuse Regulations (‘MAR’) in relation to the
dissemination of inside information to the market,
which Includes our share dealing policy and
procedures. We also have our own internal Share
Dealing Policy.
We have the right procedures to identify and control
access to inside information and, where necessary, to
ensure that it is promptly disclosed to the market. We
ensure that the Financial Conduct Authority is notified
of any delayed disclosure on announcement of inside
information to the market. We maintain secure lists of
anyone who has access to inside information and
ensure that those working for us do the same. We
ensure that everyone on those lists is aware of and
acknowledges the legal and regulatory duties
required of them while on the list.
“It is critical that IQE’s ethical
standards are upheld by
our supply chain partners
and this is mandatory in all
of our supplier relationships.
Strongly aligned partnerships
and clear communication
channels with our suppliers
at the highest levels help
to minimise supply chain
disruption and cost, whilst
increasing efficiencies
and reducing waste.”
Whistleblowing
IQE offers staff a confidential reporting mechanism,
overseen by the Group’s Chief People Officer &
General Counsel, which enables employees to raise
concerns of malpractice, non-compliance or
unethical conduct. The options for raising concerns
are widely communicated to employees and are
clearly set out in our Whistleblowing Policy. Any
whistleblowing reports are confidentially reported to
the Audit & Risk Committee.
Intellectual property and confidentiality
Our intellectual property (IP) is an important asset
and key to our continued success. We have
comprehensive policies and procedures to identify
and protect our IP, whether that be through
registered or unregistered IP rights.
Maintaining confidentiality is ingrained in our culture.
Our policy and practice ensure that all staff fully
understand what constitutes confidential information
and restrict internal access on a need-to-know basis.
Information relating to third parties is not disclosed
without the third parties’ written consent.
We have established processes for the negotiation
and signing of all confidentiality agreements and
employees are able to access our standard
templates and training modules.
+ Read more on page 44.
Human Rights and Anti‑Slavery Statement
IQE is committed to respecting the human rights of all
those working with or for us. We do not accept any
form of child or forced labour and we will not do
business with anyone who fails to uphold these
standards. IQE has a zero-tolerance approach to
modern slavery and is committed to acting ethically
and with integrity in all of its business dealings and
relationships and to implementing and enforcing
effective systems and controls to ensure modern
slavery is not taking place anywhere in its business or
in any of its supply chains. The Modern Slavery Act
addresses the role of businesses in preventing
modern slavery within their organisations and in their
supply chains. IQE has developed and implemented
policies to comply with the requirements of the UK’s
Modern Slavery Act and our Anti-Slavery Statement
can be found at iqep.com.
+ Read more at iqep.com/responsibility.
Financial sustainability and tax
transparency
We ensure compliance with all relevant tax law in all
jurisdictions in which the Group operates whilst
managing the associated tax costs in a manner that
is consistent with our Code of Conduct and its
attitude to commercial risk. We seek to maintain
stable effective and cash tax rates which reflect the
geographic markets in which we operate, and the
Group’s tax attributes, such as brought-forward
losses and special deductions such as for research
and development. We ensure that all communication
with tax authorities is conducted in a transparent and
professional manner.
Strategic Report
IQE Annual Report and Accounts 2024
39
Tom Dale
Chief People Officer & General Counsel
Culture, values, communication and
engagement
We are striving to create an open, inclusive and
values-driven culture. We want all of our people to
feel able to share their views in two-way
conversations with their peers, line managers and
senior leaders.
Following the executive restructure in late 2024, the
new Executive Leadership Team have focused on
holding regular in-person and virtual briefing
meetings with our people to enhance the openness
and transparency of our communications. Employees
are encouraged, and do, ask a range of questions in
advance of the meetings and time is retained at
each meeting for an open forum-style discussion
and Q&A. We intend to enhance of communication
and feedback loop with our employees in 2025
through the introduction of regular 'pulse' surveys and
the reintroduction of an annual people survey. This
will enhance our ability to capture and monitor a
range of cultural KPIs and to form our site and group
action plans around those.
In 2025 we intend to refresh our Vision, Mission and
Values and to introduce our ways of working, aligning
our company objectives to how we work together
every day and the role each of us has to play in the
achievement of IQE's strategy and goals. We will
integrate these into our leadership interactions and
employee communications as an integral part of the
delivery of our strategy.
“In the year 2024 we saw significant
changes to our executive leadership
and a reduction in the Group’s
overall headcount through a
mixture of voluntary and involuntary
departures. In 2025 we will be
focused on delivering the working
environment and development
opportunities that our people
want to see.“
Our people
Responsible business continued
Gender diversity
Group-level recruitment
2023
2024
Female
Male
22%
81%
78%
19%
Group level
2023
2024
83%
17%
17%
83%
Board level
2023
2024
44%
43%
56%
57%
40
IQE Annual Report and Accounts 2024
Diversity, Equity, Inclusion and Belonging (DEIB)
IQE’s population is made up of different races,
genders, ethnicities, backgrounds, religions and
beliefs across our global sites. IQE is committed to
providing equal opportunity, fair treatment and
inclusion for all, without regard to race, gender, age,
religion, ethnicity, identity, sexuality, disability, genetic
disposition, neurodiversity, veteran status, perspective,
experience or any other aspect which makes an
individual unique.
A central part of our DEIB commitment is our desire to
demonstrate inclusive leadership and represent the
diversity of our organisation and the communities
where we live and work. We seek to develop and
sustain a supportive and collaborative working
environment where difference is recognised, valued
and celebrated, whilst recognising the differences in
the legislative frameworks and cultural heritage in the
different places in which we operate.
In particular, we recognise that gender diversity
remains an ongoing issue within our industry and we
are committed to improving our gender balance. We
are supporting our Talent Acquisition Team to
increase inclusion during the hiring process, with the
aim of attracting, developing and retaining STEM
talent and securing a more diverse pool of joiners. We
did not see any improvement in the diversity of
recruitment in 2024 and in 2025 we will be working
with our recruitment team and external partners to
continue to promote diverse candidate shortlists.
In early 2024, we partnered with an external diversity
and inclusion specialist to deliver ‘Contributing to a
Diverse Workforce’ training to UK employees; the
workshops focused on unconscious bias,
microaggressions and understanding the
importance of language. We achieved 87%
attendance and positive feedback from attendees.
Our Women’s Network continued in 2024 and is being
refreshed in 2025, focusing on sharing information,
supporting development, encouraging leadership,
strengthening networks, uncovering opportunities
and championing success for women across the IQE
Group. For International Women’s Day, our Women’s
Network facilitated a Q&A session with our CEO
and CFO, Jutta Meier, and Chief People Officer and
General Counsel, Tom Dale, focusing on personal
experiences and allyship.
We continue to celebrate diversity through our
cultural celebration calendar. Recognising the
traditions and celebrations that are important to our
employees acknowledges and embraces the
diversity of our global team and fosters a positive
and communicative environment. Pride Month
celebrations focused on bringing to life the
experiences of our LGBTQi+ employees through a live
Q&A session as well as sharing educational resources
with our teams.
We launched several new global People policies this
year including an Equity, Diversity and Inclusion Policy,
Gender Identify and Transitioning at Work Policy, and
a Menopause Policy, alongside a Menopause Toolkit
for managers, reaffirming our commitment to
diversity, inclusion and belonging at IQE.
We are also aiming to build strategic partnerships
with diverse organisations and networks who share
our commitment to DEIB and can support us with our
evolving journey of effective and sustainable
transformation.
In 2024, we improved our Board diversity with the
hiring of Jutta Meier, and our Board is now proudly
57% female.
Employee wellbeing
IQE is focused on the physical and mental health of
our employees, especially during a difficult year for
our workforce. We routinely promote wellbeing
support available through our employee benefits
platforms and undertake benefits seminars to ensure
our leaders, people managers and employees are
aware of the assistance available to them.
We continue with our Employee Assistance
Programmes (EAP) which offer 24/7 support and
include bereavement assistance, counselling, legal
and financial support. Early intervention assistance is
provided through external specialists and employee
wellness plans, mitigating absence and aiding return
to work.
Taking into consideration the challenging year our
employees were experiencing; we recognised both
Mental Health Awareness Week and World Mental
Health Day. For Mental Health Awareness Week, we
encouraged our teams to ‘get moving’ in line with
2024’s theme and share their activities on our
communications platform. For World Mental Health
Day, we held ‘Time to Talk’ lunchtime sessions with our
Mental Health First Aiders; an opportunity for our
employees to talk individually or in a group. For both
events, we shared relevant resources available
internally and externally.
Empowering and supporting our talent
IQE attracts some of the best and brightest global
talent in our industry. We are continuing to use
our Competence Management System which
encompasses a formal learning and assessment
process and various training and development
forms, plans and logs. Training processes are now
communicated within departments and formalised
via our document control systems.
Our Talent Development team will continue to work
with managers and employees to effectively identify,
source and facilitate learning and development
activities, supported, where possible, by government
funding. This includes supporting professional
development through formal qualifications, as well as
enhancing on-the-job knowledge and skills.
Strategic Report
IQE Annual Report and Accounts 2024
41
Responsible business continued
Learning and Development
Our Learning and Development strategy is focused
on developing the capabilities, skills and
competencies of our site-based teams. We have also
spent time looking at single points of failure and
areas of resource scarcity to assist with the retention
of key talent. IQE’s recent financial performance has
constrained some Learning and Development
initiatives in recent years, but this is an area that our
Chief People Officer and Executive Leadership Team
know is important for our people and will be
prioritised in 2025 and beyond.
Our teams initiated high-potential employees with
the ‘9 Box’ evaluation and started conversations and
developing action plans to develop our senior leaders.
Moreover, we enabled employee mobility and training
through job rotation assignments. We assigned two
engineers from Taiwan to Newport for training, helping
as able engineering support for our Newport engineers.
As a company with highly valued intellectual
property, we have continued our mandatory
Intellectual Property courses on our LMS to improve
the understanding of IP for all IQE employees with the
desired outcome of better identifying, protecting and
exploiting our valuable IP.
We continued to invest in the development of our
employees with a Six Sigma Black Belt qualification,
with a cohort of eleven employees., due for
completion in Summer 2025. Due to the success of
the qualification, a second cohort will be enrolled in
2025. We have also enhanced our employees’ total
rewards knowledge with a series of modular videos
on our Long-Term Incentive Plan.
Early careers
Over the past year, IQE has continued building
relationships with local schools, colleges and
universities, to provide education and knowledge to
students and education leaders on the
semiconductor industry and career offerings. In 2024
this included welcoming PhD students from local
universities to our South Wales sites, as well as
running CV writing and interviewing skills workshops. ,
We have partnered with Milton Keynes college,
offering placements to T-level engineering students
who attend our site weekly to gain hands-on
experience and shadow our teams.
To bolster our talent pipeline, we have also held work
experience and intern placement opportunities in the
UK and US, allowing students to rotate around and
gain exposure to various IQE departments. This is an
important step in raising awareness of STEM careers,
particularly for students from diverse backgrounds,
securing hires and building robust talent pipelines.
We held an ‘Inspire the Next Generation of Leaders’
day during the Summer of 2024, led by our Women’s
Network, we invited our employees’ children and
family members to our global sites to experience life
at IQE. We conducted exciting experiments, learnt
about a variety of roles available at IQE and had a
tour of our facilities.
42
IQE Annual Report and Accounts 2024
Communities
and social review
For many years IQE has offered
support to local communities through
initiatives focused on wellbeing,
inclusion and giving back. We are
proud of the impact of our work,
which reflects our commitment to
social responsibility and strengthening
community partnerships.
Giving Something Back
IQE employees are entitled to one full or two half days
volunteering leave annually. We are focused on a
global approach to giving, but with local execution,
making sure we are supporting the engagements
and initiatives that mean the most to our people and
their communities.
Habitat for Humanity
IQE Massachusetts participated in Habitat for
Humanity in April 2024. We made a monetary
donation and our employees also provided support
through the building of a home for a low-income
family.
Pride in Pill
IQE supported Pride in Pill MBE for a further year, which
is an organisation that supports children in hospital
throughout Wales and England. At our South Wales
sites we collected toys and made a monetary
donation to support this initiative, which hopes to
make hospital a more pleasant experience for
children over the Christmas period.
Support of local sports teams
• Penybont Women Football Club
• Fairwater Rugby Football Club Mini Juniors
• Newport Grass Roots Cricket
Taiwan - Charity Walk
To support a local charity that cares for children in
remote areas, our Taiwan team raised money by
walking 10,000 steps per day. The IQE Taiwan team
personally delivered their donations to the charity.
NC Hurricane Helene Relief
Following the aftermath of Hurricane Helene which
devastated areas of North Carolina, Georgia, South
Carolina, Virginia and Florida, IQE launched a
JustGiving page to support a local North Carolina
charity (Community Housing Coalition (CHC) of
Madison County) dedicated to aiding those
impacted by the storm. Community Housing Coalition
(CHC) of Madison County is a community-based
nonprofit agency that facilitates urgent home repairs
to low-income Madison County residents in need of
assistance.
Strategic Report
IQE Annual Report and Accounts 2024
43
Intellectual property
IQE’s world-leading technology is underpinned by a
strong intellectual property (IP) portfolio. Our process
know how, the secrets of our trade which have been
gained through more than 30 years in the field,
enhances this work and is closely protected by IQE.
In 2024, IQE continued to streamline its IP portfolio to
better match the Company’s strategic goals and
technology projects. IQE has around 90 granted
patents, with 2024 yielding 17 new grants and 12 new
patent applications.
IQE’s patents cover all technology development areas
and are increasingly aligned to the Company’s growth
strategy in GaN technologies for Power and microLEDs.
The portfolio is also aligned to our major market
verticals: Smart connected devices, Communications
infrastructure, and Automotive & Industrial.
Innovation portfolio aligned to market verticals
“2024...our ’Year
of Innovation’
saw another
record number
of innovation
disclosures”
Victoria Yeomans
Head of IP
Smart Connected Devices
Communications Infrastructure
Automotive & Industrial
With rigorous internal processes to identify and
review inventions in our teams, we are able to harvest
inventions efficiently and to make strategic decisions
over those that we protect by patent and those we
protect by trade secrets and confidentiality. 2024,
which we designated as our ‘Year of Innovation’, saw
another record number of innovation disclosures
made to the IP department which continued the
trend of the last few years. Training of our staff ensures
that everyone understands the value of our IP in our
technology and products.
We are proud that IQE was second in the list of
companies filing patents in the UK in the H01L technical
classification (semiconductor devices) in 2024.
2023
2024
Responsible business continued
44
IQE Annual Report and Accounts 2024
Health, Safety, Security
and Environmental
review
2024 marked a significant milestone in IQE’s Health,
Safety, Security and Environmental (HSSE) journey. An
overall reduction in lost time and all injuries was very
positive, albeit we continue to strive for our goal of
achieving zero injuries, significant safety events,
environmental breaches, and any work-related ill
health. The internal focus which had begun on
Process Safety gained a huge amount of traction
within the organisation and resulted in some
significant improvements being implemented. Pur
commitment to Science Based Targets was formally
validated along with achieving a further year of
certification to ISO 14064:1 (verification of Greenhouse
Gas inventory). Two of our sites in the USA attained
joint certification to ISO45001 with the remaining site
scheduled for certification in 2025. Additionally, the
security functions within IQE became embedded into
the Group HSSE team and with it a renewed focus
and vigour for improvements. Numerous other Health
and Safety programmes focused on continued
improvement continued to be implemented at pace
to ensure our systems and processes are fit to
support our future growth ambitions.
Drive to World Class
To drive the journey to World Class performance, we
continue to focus on our six key pillars which are
critical to achieving our vision:
Visible Leadership – increase the visibility and
engagement of leadership to help develop a positive
culture
Governance – implemented, robust governance
processes for HSSE
Compliance Assurance – implementing robust
compliance assurance processes
Competence – deploying a framework for
demonstrable competence at all organisational
levels
Learning Organisation – deploying a framework to
support sharing and learning from events and best
practices across the organisation
Continuous Improvement – actively seek out best
practices internally and externally to drive continuous
improvement across HSSE. We will also regularly
review our existing processes to identify opportunities
for improvement.
2024 Performance
1
lost time injuries
2023: 3
1,238
near miss reports/OFIs
2023: 1,805
15
all injuries
2023: 17
6,224
Positive conversations
2023: 4,383
0
regulator
reportable events
2023: 2
2022
2023 2024
1,630
1,805
1,238
2022
2023 2024
799
4,383
6,226
Near miss/OFI
Positive safety
conversations
Strategic Report
IQE Annual Report and Accounts 2024
45
Health and safety
performance
Zero Is Possible/Leading Metrics
During 2024 we focused our Zero is Possible
campaigns on using the ‘three questions’ to facilitate
positive safety conversations within the business.
Positive safety conversations were soft launched
within the Company during 2022 and formally driven
with training during 2023. Although these are informal
conversations, the total number is recorded and any
outputs requiring further action are captured as
opportunities for improvement. Promoting positive
conversations with respectful challenge is a key
element in driving a culture of openness and reporting
in the organisation. The framework of the ‘three
questions’ allows even the least confident team
members to engage with the process and this
supports the culture of respectful challenge which we
are driving. With the support of this framework, during
2024 the total number of positive conversations
carried out was 6,224, a 678% increase on the baseline
year and a 34% increase on the previous year.
The three questions have their foundations in process
safety, having been extrapolated from direction given
by the UK Health and Safety Executive following a
major incident in the UK. However, they provide a
simple framework that is applicable across all
aspects of HSSE, making them ideal for use in positive
conversations. Under the umbrella that positive
behaviours must be led from the boardroom down,
the three questions ask:
1. Do we know what can go wrong?
2. Do we know what barriers we have to ensure that it
doesn’t go wrong?
3. Do we know that our barriers are effective and
working properly?
The use of these across the organisation has led to
numerous improvements being actioned and
additional focus on the use of these will be applied
during the coming year.
Responsible business continued
46
IQE Annual Report and Accounts 2024
During 2024 we also proactively reported
opportunities for improvement and Near Miss events.
These ‘free lessons’ allow us to robustly act to
remediate any deficiencies before any
consequences are realised. With the rise in positive
conversations and the cultural shift that this brings,
we recognised a decrease in overall Near Miss/
Opportunity for Improvement reporting. The reduction
equated to 32% decrease in reporting against 2023
performance. This was expected as positive safety
conversations being carried out mean that potential
issues are being discussed and potentially rectified
before becoming Near Miss or OFIs. The number of
Near Misses/Opportunities reported was still a 274%
increase on the 2021 baseline year. Overall proactive
reports (Near Misses/Opportunities/Positive
conversations) rose overall year on year.
Overall Proactive Engagements
2023
2024
Positive conversations
4,383
6,224
Near Misses/OFIs
1,805
1,238
Overall
6,188
7,462
Lagging Metrics
Between 2023 and 2024, we went 491 days without a
Lost Time Injury. Unfortunately, during November 2024
a contractor colleague suffered a Lost Time Injury which
led to one lost working day before he was able to
return on full duties. This represents an improvement
on previous years but any situation that results in our
employees or contractor partners being injured is
hugely disappointing to us and we strive to learn from
such events to prevent reoccurrence in coming years.
2024 injuries
2023
2024
Lost Time Injuries
3
1
All Injuries (inc. LTIs)
17
15
We had one Lost Time Injury in 2024 when a
contractor employee sustained a cut to the head
which was treated at hospital. The injured person lost
one working day before returning to work on normal
duties.
The mantra “Nothing you do on this site today will be
as important as going home to your loved ones safe
and healthy” is displayed at our Newport site
entrance and will be rolled out across the rest of our
sites in the coming year as we continue our cultural
improvement journey and improve mindsets.
“Nothing you do on this site
today will be as important
as going home to your loved
ones safe and healthy“
This message is displayed at our Newport site
entrance and will be rolled our across the rest of our
sites in the coming year.
Strategic Report
IQE Annual Report and Accounts 2024
47
Environmental performance
2024 Environmental performance
2023
2024
Environmental incidents
(Reportable)
0
0
Environmental incidents
(Not reportable)
2
4
NM/OFI environmental
133
135
Average per site
13.3
15
Science-Based Targets
Following our attainment of the independently
verified ISO 14064 GHG emissions reduction standard
during 2021 and a commitment to the Science-Based
Targets initiative (SBTi) made during 2022, IQE’s ESG
Committee have actively been working to ensure
robust plans are in place to facilitate our emissions
reduction journey.
During 2024 we achieved the milestone of
successfully attaining approval of our science-based
targets to reduce greenhouse gas emissions in line
with the SBTi Net Zero Standard, which seeks to limit
global warming to 1.5oC. The SBTi’s Target Validation
Team has classified IQE’s near and long-term targets
as in line with this ambition and has also verified IQE’s
mitigation pathways for reaching Net Zero by 2050 or
sooner. Part of this process was gathering data
relating to Scope 3 emissions. This included engaging
with our supply chain partners to, where possible,
gather data relating to the impact of GHG emissions
from purchased goods and services, upstream and
downstream transport and further processing. Key to
SBTi involvement is the Company outlining how we
will reduce our emissions over a set period. These
targets galvanise the action required for significant
emissions reductions to be achieved by 2030.
2024 performance
Pleasingly, the focus outlined regarding reporting
of Opportunities for Improvement and Near Misses
across the business had a further positive effect on
Environmental reporting across our sites. The average
number of Environmental Opportunities or Near
Misses reported increase in the past year from 13.3
average per site to 15. All of these were remediated
and investigated to prevent re-occurrence.
Emissions performance
A 19.11% reduction in absolute emissions was achieved
for 2024 (five year rolling average) in comparison to
2021 baseline (Scope/category 1 & 2. This is due to
several factors, most notably with 2024 being the first
full year without our Singapore and smaller
Taiwanese site being included in the calculation due
to their closure, along with the Pennsylvania facility
not being operational and the scaling down of the
Silicon site. These organisational consolidation
exercises resulted in a significant drop in electric and
gas consumption. However, direct emissions
increased in the period due to the introduction of new
reactors and permitting changes which now allow
increased hours of reactor operations.
Other elements such as air travel witnessed a
significant rise during the years since the restrictions
imposed due to the global pandemic were lifted
across the globe. However, in 2024 with tighter control
over business travel a decrease in emissions from
business travel was seen. For the first time we had
some GHG emissions increase from losses of
fluorinated gases in some site cooling systems. This is
disappointing and these situations will continue to be
monitored to ensure they remain controlled.
Certification
In 2025 IQE will be fully audited to re-certify to the ISO
14064-1 standard to ensure we have maintained our
high standards of emissions reporting. This will
represent our fourth year of certification.
0
Environmental
breaches
0
Environmental
reportable incidents
Responsible business continued
48
IQE Annual Report and Accounts 2024
Emissions data
Inventory summary (mandatory ISO 14064 criteria) tCO2e )
Category (ISO 14064-1:2018)
Scopes
(ISO 14064-1:2006)
2023
2024
Category 1: Direct emissions
Scope 1
2,757
3,455
Category 2: Indirect emissions from imported energy (location-based
method)
Scope 2
15,068
14,328
Category 3: Indirect emissions from transportation
Scope 3
968
519
Category 4: Indirect emissions from products used by organisation
Scope 3
811
852
Category 5: Indirect emissions associated with the use of products
from the organisation
Scope 3
0
0
Category 6: Indirect emissions from other sources
Scope 3
0
0
Total direct emissions
2,757
3,455
Total indirect emissions
16,847
15,699
Total gross emissions
19,604
19,154
Category 1 direct removals
0
0
Purchased emission reductions
0
0
Total net emissions
19,604
19,154
Emissions Intensity (Operating revenue/gross tCO2e) (£m)
Total emissions
177.50
Total Water Use Volume and Sources (cubic metres)
2023
2024
Municipal Supply
133,516
78,724
Recycled Water
0
3,057
Purchased Water
608
756
Total Water
134,124,
82,537
Waste generation (tonnes)
2023
2024
Landfill (Non-Hazardous) to Land
54
49
Recycled
1,670
1,377
Hazardous
266
203
Energy (Incineration)
25
25
Total Waste
2,015
1,654
Energy consumption summary
2023
2024
Natural Gas
9,260,578
9,177,207
Electricity
49,858,608 47,918,407
Strategic Report
IQE Annual Report and Accounts 2024
49
Introduction
IQE has a unique opportunity to contribute to global
efforts towards a sustainable future. Our products will
enable the transition to clean energy, whether that be
through the use of renewable energy, energy storage,
efficient power inverters or the many other
applications where compound semiconductors offer
better and more efficient performance. At IQE we are
enthusiastic about the role we have to play in the
greener future and we are embracing the environmental,
social and governance (‘ESG’) considerations to
running a modern, diverse global business.
Whilst IQE has prioritised its financial and business
performance throughout 2024, we have continued to
make steady progress in the assessment of our
climate-related risks and opportunities. With the help
of our external consultants, we have completed a
climate change scenario analysis providing a
comprehensive, data-driven examination of the
climate-related risks most likely to affect IQE’s facilities
across our three critical regions and focusing on our
largest sites in Cardiff and Newport in South Wales,
North Carolina, USA and Hsinchu City in Taiwan.
On 24 October 2024 our near-term and Net Zero
targets were approved by the Science-Based Targets
initiative (SBTi), validating IQE's Scope 1, 2 and 3
long-term target ambitions and alignment with SBTI's
1.5 degrees mitigation pathways for reaching Net Zero
by 2050 or sooner. The SBTi is a leading climate
action organisation that has developed standards
and tools which allow companies to set greenhouse
gas emissions reduction targets in line with what is
needed to keep global heating below catastrophic
levels and reach Net Zero by 2050 at latest.
Compliance Statement
IQE is registered on the AIM segment of the London
Stock Exchange. We have reported on our Climate-
related Financial Disclosures using the Task Force
on Climate-related Financial Disclosures (‘TCFD’)
framework. We consider our disclosures to be
consistent with all TCFD recommendations and with
the climate-related financial disclosure requirements
under the Companies (Strategic Report) (Climate-
related Financial Disclosure) Regulations 2022. We
have structured our TCFD report in line with the four
TCFD pillars: Governance, Strategy, Risk Management,
and Metrics and Targets.
You will also note a number of cross references
through our TCFD report to other sections in the
Annual Report where additional relevant information
is available.
“We have made good
progress in 2024 in a
challenging business
environment and remain
committed to reducing the
impact of our operations
on the environment.”
Tom Dale
Chief People Officer & General Counsel
Climate-
related
financial
disclosures
Task Force on Climate-related
Financial Disclosures Statement for
the year ended 31 December 2024.
TCFD Report
50
IQE Annual Report and Accounts 2024
TCFD pillar
Recommended disclosure
Disclosure
locations
Governance: Disclose the
organisation’s governance around
climate-related risks
and opportunities
A. Describe the Board’s oversight of climate-related risks
and opportunities
Page 52
B. Describe management’s role in assessing
and managing climate-related risks and opportunities
Page 52
Strategy: Disclose the actual
and potential impacts
of climate-related risks
and opportunities on the
organisation’s businesses, strategy,
and financial planning where such
information is material
A. Describe climate-related risks and opportunities the
organisation has identified over the short, medium and
long term
Page 53
B. Describe the impact of climate-related risks and
opportunities on the organisation’s businesses, strategy
and financial planning
Page 53
C. Describe the resilience of the organisation’s strategy,
taking into consideration different climate-related
scenarios, including a 2ºC or lower scenario
Page 59
Risk management: Disclose how the
organisation identifies, assesses and
manages climate-related risks
A. Describe the organisation’s processes for identifying
and assessing climate-related risks
Page 60
B. Describe the organisation’s processes for managing
climate-related risks
Page 60
C. Describe how processes for identifying, assessing and
managing climate-related risks are integrated into the
organisation’s overall risk management
Page 60
Metrics and targets: Disclose
the metrics and targets used
to assess and manage relevant
climate-related risks and
opportunities where such
information is material
A. Disclose the metrics used by the organisation to assess
climate-related risks and opportunities in line with its
strategy and risk management process
Page 60
B. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3
greenhouse gas (GHG) emissions, and the related risks
Page 60
C. Describe the targets used by the organisation to
managed climate-related risks and opportunities and
performance against targets
Page 60
IQE’s governance structure – climate-related focus
Governance Framework
IQE plc Board of Directors
ESG Committee
Remuneration Committee
Audit & Risk Committee
ESG Working Group
Executive Leadership Team
Group Risk Committee
Strategic Report
IQE Annual Report and Accounts 2024
51
Board’s oversight of climate-related risks
and opportunities
IQE is committed to doing business in an ethical and
transparent manner. In 2024 the Board and its
Committees have been focused on guiding the
Group through a challenging business environment
and, where possible, aligning the Group’s ESG
strategy with the Group’s short-term business needs.
The Board has therefore focused the ESG strategy on
minimising the Group’s long-term carbon impact
through site consolidation and the climate-related
opportunities arising from the growth in Power and
Display markets.
Throughout 2023 and 2024 the Board worked with
management in the development of IQE’s Scope 1,
Scope 2 and Scope 3 targets under the Science-
Based Targets initiative (‘SBTi’). The Board is pleased
to see that the Group’s SBTi targets were approved
and is committed to reducing the Group’s emissions
to at least the expectations of the SBTi. The Board also
supported management with our climate scenario
analysis and the output of that work is set out in this
report.
Role of the Board and its Committees
The Board delegates the oversight of certain aspects
of the Group’s ESG strategy to its Committees and,
where not all of the Board is present at the
Committee meeting, the Board receives verbal
updates from the Committees at the next Board
meeting as part of IQE’s overall governance
arrangements relating to ESG, as summarised in the
diagram on page 51.
The ESG Committee monitors and oversees the
execution of IQE’s sustainability strategy, including the
monitoring of the Group’s progress against our Net
Zero and SBTi targets through its review of the Group’s
emissions data. Further details on the ESG Committee
can be found on page 82. The ESG Committee aims
to meet twice a year and provides strategic guidance
and scrutiny of management’s assessment and
management of climate-related risks and
opportunities, and reports to the Board following each
meeting of the Committee.
The Audit & Risk Committee reviews the impact of
climate change when considering the Group’s
significant and emerging risks. Whilst the Group’s
climate-related risks are emerging and less significant
than some of the other risks that the Group has dealt
with through 2024, the review and reporting of
climate-related risks and opportunities is subject to
specific requirements and standards and are therefore
captured and reported to the Audit & Risk Committee.
Please see page 76 for more detail on the Audit & Risk
Committee and its activities during 2024.
The Remuneration Committee considered the
applicability of climate-related performance
objectives for the long-term incentive awards made
to Executive Directors in 2024 and, given the Group’s
primary focus on improving financial performance, it
was agreed that these were not currently appropriate
performance measures for the Executive Directors.
Whilst the Remuneration Committee will reconsider
the applicability of climate-related performance
measures in determining performance measures for
2025, it is likely that the Remuneration Committee will
continue to focus management’s performance on
the Group’s short-term financial performance and
the outcomes of the announced Strategic Review.
Further information is provided in the Remuneration
Committee Report on page 83.
Role of management
The Executive Leadership Team (‘ELT’) has established
a Group Risk Committee comprising members of the
ELT and other key management stakeholders within
the business. The Group Risk Committee considers
climate-related risks and opportunities as part of its
overall consideration of the Group’s material risks and
opportunities through the Group Risk Register, and
reports to the Audit & Risk Committee. See page 62
for further detail.
Jutta Meier, Chief Executive Officer and Chief
Financial Officer, is the Board Director with ultimate
responsibility for the Group’s climate change-related
issues. Tom Dale, Chief People Officer and General
Counsel, is the ELT member responsible for the
delivery of IQE’s sustainability strategy and also chairs
the Group Risk Committee. IQE has established a
management working group which meets at least
quarterly and comprises the Chief People Officer and
General Counsel, Group HSE Director, and Head of
Global Supply Chain and other stakeholders from
across the Group as required on specific areas. The
working group drives the day-to-day actions for IQE’s
ESG agenda. Management reports to the Board
through both the ESG Committee and the Audit & Risk
Committee, as described above.
Management has been focused in 2024 on
understanding and developing IQE’s climate-related
risks using a qualitative scenario analysis, and in
achieving approval for IQE’s SBTi targets. Climate-
related opportunities continue to be considered as
part of the Group’s strategy and near-term objectives,
although management’s priority will continue to be
the Group’s business performance in a challenging
market environment. Climate-related risks will continue
to be monitored and assessed and, given their
nature, factored into the Group’s longer-term planning.
TCFD Report continued
52
IQE Annual Report and Accounts 2024
The impact of risks was assessed across the short, medium and long-term, defined as:
Time horizon
Year from
Year to
Rationale
Short term
2024
2029
Aligns with our short-term financial planning and viability
assessment period, current business strategy planning and
near-term SBTi targets.
Medium term
2029
2034
Aligns with expected technology cycles relevant to the Group’s
strategy.
Long term
2034
2050
Aligns with our long-term Net Zero commitment, long-term SBTi
targets and will align with the useful life of many of the
organisation’s assets.
Strategy
Identified climate-related risks and
opportunities
In 2024, with the help of our external consultants, we
completed a qualitative climate change scenario
analysis providing a comprehensive, data-driven
examination of the climate-related risks most likely to
affect IQE’s facilities across our three critical regions
and focusing on our sites in Cardiff/Newport in South
Wales, North Carolina, USA and Hsinchu City in Taiwan.
These sites were selected based on their geographical
dispersion and importance to the Group, ensuring
that we identified the range of climate-related risks
most likely to impact our operations.
Our climate change scenario analysis considered
climate change using two diverse scenarios. Firstly, a
low carbon pathway based on Representative
Concentration Pathway (RCP) 4.5, aligning with a
global temperature rise of approximately 1.5 degrees.
This is the pathway which reflects scenarios in which
global efforts to reduce carbon emissions are
relatively successful. Secondly, a high carbon
pathway based on an RCP of 8.5 which projects a
more extreme global temperature increase of around
4 degrees, reflecting a future where carbon emissions
remain high, and mitigation efforts fall short. We
intend to use this analysis to gain a deeper
understanding of the climate-related risks that could
disrupt our operations considering those two distinct
global pathways.
Risks were assigned one of three classifications
based on the analysis:
1. Minimal – risks with a low likelihood of impacting
IQE’s operations under weather warming pathway.
These risks do not require any immediate action
but are noted for potential future monitoring.
2. Moderate – risks that present a relative potential for
climate-related impacts, though not yet requiring
urgent intervention. These risks will be periodically
monitored to ensure IQE can response swiftly if
conditions worsen.
3. Significant – risks with a high likelihood of serious
impacts on IQE’s operations, regardless of the
warming scenario. These risks will be subject to
further analysis by IQE’s risk management process
to determine their financial materiality and to
inform development of appropriate mitigation
strategies.
Strategic Report
IQE Annual Report and Accounts 2024
53
Our climate change scenario analysis used several
key climate models and reports, including:
• Coupled Model Intercomparison Project Phase 5
(CMIP5) projection from the World Climate
Research Programme: Provides global climate
projections based on multiple climate models and
scenarios.
• Shared Socioeconomic Pathways (SSP)
projections from the World Bank: Incorporates
socio-economic scenarios to project future climate
risks and economic impacts.
• UK Climate Projection 2018 (UKCP18) projection
from the UK Climate Resilience Programme:
Provides high-resolution climate projections
specific to the UK, including the Cardiff-Newport
region.
• Climate Change Scientific Report from Taiwan’s
National Science and Technology Council: Offers
region-specific projections for Taiwan, particularly
relevant to IQE’s Hsinchu City operations.
• Fifth Assessment Report of the Intergovernmental
Panel on Climate Change (IPCC): A comprehensive
global review of climate science, impacts, and risks.
• Localized Constructed Analogs (LOCA) from the
US National Oceanic and Atmospheric
Administration: Provides localised climate
modelling based upon the CMIP5 projections.
• ‘Net Zero by 2050’ report from the International
Energy Agency (IEA): Examines pathways to
achieving Net Zero emissions by 2050 and the
associated transition risks.
Several supplementary studies and reports were also
consulted to ensure the broadest possible consensus
from academic and scientific communities. The
integration of these sources allows the analysis to
incorporate a wide range of views and models,
enhancing the reliability of conclusions.
We assessed the transitional and physical climate
risks which we determined to be most relevant to
IQE’s business:
Transitional risks
Transitional risks are those associated with changes
in the way markets operate, and which may result
from legal or regulatory changes or consumer habits
as we transition to a lower-carbon economy.
• Energy security - As global energy markets shift
towards low-carbon sources, there is a risk of
supply shortages or rising energy prices.
particularly under scenarios where renewable
energy infrastructure developments lag demand.
As a high-tech manufacturing company, IQE’s
energy consumption is predominantly driven by
electricity and so our assessment focused on
market fluctuations and the availability of a stable
renewable energy supply to meet our emissions
reduction targets.
• Carbon pricing - The introduction of carbon taxes
and pricing schemes could increase operational
costs for IQE, especially considering our energy-
intensive manufacturing processes. Understanding
how these costs may evolve under different
emissions scenarios is crucial for financial planning
and maintaining profitability.
In addition to the key transitional risks identified, we
also considered political risks and customer risks and
have determined that these risks are currently of
lower materiality to IQE.
Physical risks
• Heat stress - Rising temperatures and more
frequent heatwaves pose a risk to workforce
productivity and could increase cooling costs for
our manufacturing facilities.
• Sea levels rise - Facilities in or near coastal or
low-lying areas face potential risks from projected
sea level rises. This could lead to episodic flooding
during high tides and storm surges, potentially
damaging site infrastructure and site accessibility.
• Flood risks - Increased precipitation and more
intense storm events elevate flood risks for facilities.
Flooding damage could damage IQE’s
infrastructure, disrupt operations and impact
supply chain continuity.
In addition to the key physical risks identified, the
assessment reviewed several other minor physical
risks that could affect IQE’s operations, including
wildfire and drought, though these pose lower levels
of direct threat across our regions.
We have reported only on the risks which we have
assessed with a moderate or significant classification
in the tables below.
TCFD Report continued
54
IQE Annual Report and Accounts 2024
Transitional risks
Risk
Risk description
TCFD
category
Potential impact
Mitigating actions
Time
horizon
Metrics & targets
Energy
Security
As global energy
markets shift towards
low-carbon sources,
there is a risk of supply
shortages or rising
energy prices,
particularly under
scenarios where
renewable energy
infrastructure
developments lag
demand
Policy &
Legal/
Reputation
The Group’s site in
Hsinchu, Taiwan is
subject to significant
climate-related risks
from Energy Security.
Taiwan’s energy supply
is heavily dependent
on imported fossil fuels,
making it highly
susceptible to global
fuel price fluctuations,
which may therefore
result in an increase in
IQE’s operating costs.
Taiwan also appears to
have limited access to
stable renewable
energy sources which
may hinder its energy
security and its
proposed transition to
Net Zero. The required
investment in
renewable energy
sources may raise
energy prices, and
therefore IQE’s
operating costs.
We expect the Taiwan
government to
implement the
investments required
to meet its stated
renewable energy
targets, which include
being Net Zero by
2050. The
semiconductor
industry is a crucial
part of Taiwan’s
economy, and we
would therefore
expect that the
industry will be
appropriately
supported through
this transition phase.
When available, the
Group will also look to
capitalise on
renewable energy
contracts.
Medium
to Long
Scope 1 and
Scope 2
emissions from
the Taiwan site
The Group’s site in
Greensboro, North
Carolina is subject to
moderate climate-
related risks from
Energy Security. While
North Carolina has
made strides in
renewable energy, with
26% of its energy now
sourced from
renewables, it is our
assessment that the
state’s Clean Energy
Plan lacks concrete
policies to reach its
target of 70%
renewable energy by
2030. This leaves some
uncertainty in future
energy availability and
cost stability,
potentially affecting
IQE’s operating
expenses in its switch
to renewable energy.
Recent political
changes in the US, and
the state, may result in
adjustments to North
Carolina’s renewable
energy plans.
We expect policy
developments in
North Carolina to
provide the
necessary financial
support, regulatory
framework and
technological
advancements to
achieve the clean
energy targets.
Medium
to Long
Scope 1 and
Scope 2
emissions from
the North
Carolina site
Strategic Report
IQE Annual Report and Accounts 2024
55
TCFD Report continued
Transitional risks
Risk
Risk description
TCFD
category
Potential impact
Mitigating actions
Time
horizon
Metrics & targets
Carbon Pricing
The introduction of
carbon taxes and
pricing schemes could
increase operational
costs for IQE, especially
in our energy-intensive
manufacturing
processes.
Understanding how
these costs may evolve
under different
emissions scenarios is
crucial for financial
planning and
maintaining
profitability.
Policy &
Legal
The Group’s site in
Hsinchu, Taiwan is
subject to moderate
risks relating to carbon
pricing. Taiwan has
recently introduced a
carbon fee system
which could impose
additional financial
costs for IQE, especially
if these fees rise over
time.
We expect to secure
renewable energy
contracts when
available to hedge
against future rises in
energy costs. We will
also work closely with
the Ministry of
Environment to
ensure that IQE has
the opportunity to
benefit from any
beneficial rates
aligned with meeting
carbon reduction
targets.
Medium
Energy prices in
Taiwan
Supply chain
risks
Supply chain risks
relating to: (a)
escalating costs from
rising demand for rare
earth materials like
gallium; or (b) extreme
weather events
disrupting the supply of
essential materials and
components, whether
nationally or
internationally.
Policy &
Legal,
Market
Increased pricing from
suppliers as they seek
to pass on rising costs
and increased working
capital levels to hold
sufficient inventory.
Multi-sourcing from
diverse geographical
areas, where possible,
appropriate inventory
levels to mitigate
short term
fluctuations in supply,
long term contracts
with key suppliers.
Medium
Working Capital
Levels relating
to substrates
and other raw
materials
56
IQE Annual Report and Accounts 2024
Physical risks
Physical risks are the exposure of our assets or value chain to physical hazards caused by the effects of
climate change. We have considered three key physical risks relating to Heat Stress, Flood Risk and Tidelines.
Physical risks
Risk
Risk description
TCFD
category
Potential impact
Mitigating actions
Time
horizon
Metrics &
targets
Heat Stress
Rising temperatures
and more frequent
heatwaves pose a risk
to workforce
productivity and could
increase cooling costs
for our manufacturing
facilities.
Acute/
Chronic
The Group’s site in
Greensboro, North
Carolina is subject to
a significant risk
relating to Heat Stress.
Rising temperatures
are expected to
significantly increase
the number of
high-heat days, which
may elevate cooling
demands and
operating costs,
impacting both
energy consumption
and workforce
productivity. The
Greensboro site will
need to implement
additional adaptive
measures to maintain
safe and comfortable
working environment.
Implement
additional cooling
capacity to keep
manufacturing
equipment within
operating limits and
to maintain a
comfortable working
environment.
Long
Number of
days
operations are
disrupted due
to extreme
temperatures
Revenue loss
from site
disruption
Insurance
premiums:
The Group’s site in
Hsinchu, Taiwan, is
subject to a moderate
risk relating to Heat
Stress. Rising
temperatures are
expected to increase
the number of heat
stress days, which
may impact
operational efficiency
and workforce
productivity, and
require additional
adaptive measures to
maintain safe and
comfortable working
environments. Higher
cooling costs relating
to air conditioning will
increase operational
costs.
Implement
additional cooling
capacity to keep
manufacturing
equipment within
operating limits and
to maintain
comfortable working
environment.
Long
Number of
days
operations are
disrupted due
to extreme
temperatures
Revenue loss
from site
disruption
Insurance
premiums:
Strategic Report
IQE Annual Report and Accounts 2024
57
Physical risks
Risk
Risk description
TCFD
category
Potential impact
Mitigating actions
Time
horizon
Metrics &
targets
Flood Risk
Increased precipitation
and more intense
storm events elevate
flood risks for facilities.
Flooding damage
could damage IQE’s
infrastructure, disrupt
operations and impact
supply chain continuity.
Acute
The Group’s site in
North Carolina is
subject to potentially
significant riverine and
surface flooding,
particularly under the
higher carbon
pathway, due to
increased rainfall and
extreme precipitation
days and the proximity
of the East Fork Deep
River.
IQE’s sites are
appropriately
insured for asset/
property damage as
well as business
interruption. North
Carolina is an area
with significant
social, economic
and political
importance,
particularly for the
semiconductor
industry, and we
would expect local
or national
intervention to
address the risks of
flood. In addition, IQE
will consider the
long-term viability of
the site at the
appropriate
junctures in its lease.
Long
term
Number of
days
operations are
disrupted due
to flooding
events
Revenue loss
from site
disruption
Insurance
premiums
Sea Level Rise
Facilities in or near
coastal or low-lying
areas face potential
risks from projected
sea level rises. This
could lead to episodic
flooding during high
tides and storm surges,
potentially damaging
site infrastructure and
site accessibility.
Acute
The Group’s sites in
Cardiff and Newport,
South Wales, faces
potentially moderate
risks relating to sea
level rises. Projections
indicate that sea level
rises could place parts
of Cardiff within the
limits of future tideline
boundaries,
heightening risk of
tidal flooding,
particularly during
extreme weather
events or high tides.
Whilst the Newport site
is not directly
vulnerable to rising
sea levels, potential
access-related risks
exist because the local
road and rail network
could be impacted,
affecting supply chain
continuity and
employee commutes
during periods of high
tide or coastal
flooding.
We would expect
substantial
government
intervention to
mitigate the impacts
of sea level rises.,
including the
construction of flood
defences, seawalls
and storm surge
barriers, aligned with
urban planning
policies.
Long
term
Number of
days
operations are
disrupted due
to flooding
events
Revenue loss
from site
disruption
Insurance
premiums
TCFD Report continued
58
IQE Annual Report and Accounts 2024
Opportunities
Opportunities
Opportunity description
TCFD
category
Potential impact
Mitigating actions
Time
horizon
Metrics &
targets
Increased demand
for products
enabling improved
efficiency and
clean energy
The transition to a
low-carbon economy
requires significant
investment in more
sustainable
technologies and
product solutions. GaN
power products, core
to IQE's strategy, will
enable Innovation and
development in areas
such as batteries and
chargers.
Market,
Products
and
Services,
Resource
Efficiency
Financial: overall
revenue growth from
increased sales of
GaN-based products.
Operations: decrease
in Scope 3 GHG
emissions.
N/A
Short
Revenues from
GaN-based
products.
Impact of climate-related risks and
opportunities
We have identified climate change as a principal risk
for IQE but note that the most significant impacts are
likely to be felt over the long-term, beyond current
planning cycles. The transitional and physical risks set
out on pages 55 to 58 provide an explanation of the
impact across IQE’s key geographical areas of
operation and our largest manufacturing sites, and
the nature of that expected impact.
Climate change also represents a source of material
opportunity for IQE. Our principal opportunities relate
to the greater efficiencies provided by GaN power
semiconductors and our existing R&D expenditure
and product roadmap are already well aligned to
these opportunities and will have a key role in the
Group’s strategy over the coming years. Power
semiconductors address structurally growing
markets which have a key role to play in
decarbonisation and addressing the impacts of
climate change. The Group is well placed to support
our customers with the impact of climate change
and the transition to a lower-carbon economy due to
the performance and efficiency benefits provided by
compound semiconductors.
Resilience of IQE’s strategy to climate-related
scenarios
The scenarios used in our climate scenario analysis
are explained in more detail above and have been
selected to understand the range of possible
outcomes on the Group. We believe, given the current
assessment of risks that may impact the Group and
our current mitigation plans, that our climate risk
exposure is moderate in the medium to long term. We
do not believe that any significant additional capital
expenditure or changes to business strategy are
required as a result of predicted climate changes
and we can incorporate climate risks into our
business-as-usual activities. The Board does,
however, remain aware of the ever-changing risks
attached to climate change and will regularly assess
these risks against judgements and estimates made
in the preparation of the Group’s financial
statements, and against the Group’s other principal
risks.
IQE's strategy is well aligned to addressing global
technology challenges. Our products address the
Automotive and Industrial sectors where electric
vehicles, autonomous driving technology and power
systems demand advanced semiconductors for
better performance and energy efficiency. The
proliferation of artificial intelligence is driving growth
across a wide variety of Communications,
Infrastructure and Security applications by enabling
faster data processing and more efficient network
management, including data centres, fibre networks
as well as the expansion of 5G/6G wireless
infrastructure. Advanced power semiconductors will
be required to mitigate the energy usage driven by
artificial intelligence, and our connect and sense
products will be required to address the transfer and
management of data.
Strategic Report
IQE Annual Report and Accounts 2024
59
Whilst we have more work to do in in assessing the
financial implications of the risks identified in this
report, the Group’s currently considers that climate-
related risks are emerging and not currently material
to the achievement of the Group’s strategy.
The outputs of our climate change scenario analysis
work is on pages 59 to 60. The limitations of this
scenario analysis are:
• Uncertainty in climate models – our scenario
analysis work draws from a range of studies that
use different climate models, each with their own
assumptions and methodologies. Often these
provide relatively high level global and regional
forecasts. There is inherent uncertainty in how
climate risks will manifest at a local level,
particularly as global responses to climate change
evolve.
• Variability in risk outcomes – areas identified as
having significant climate-related risks may not
experience impacts as severe as projected,
depending on how climate change unfolds.
Conversely, areas identified as low risk could see
risks escalate due to unforeseen factors, such as
shifts in regulatory frameworks, technological
advances, or socio-economic developments.
• Dynamic nature of risk – climate-related risks are
dynamic and their likelihood and potential impact
may vary over time.
The Group believes that its operations are resilient
against potential impacts of climate risks and that it
is well placed to be able to support our customers
with the impact of climate change and the transition
to a lower-carbon economy. We will do this through
the performance and efficiency benefits provided by
compound semiconductors.
Risk management
Identifying and assessing climate-related risks,
and integration with IQE’s overall risk
management
The assessment of climate-related risks and
opportunities is integrated into IQE’s wider risk
management processes (see pages 62 to 67) which
allows for climate-related risks to be assessed
against our other principal and emerging risks. The
chart on page 63 shows the relative importance of
our climate-related risks against our principal risks,
and we have taken the approach of qualitatively
aggregating our identified climate-related risks into a
single risk item for ease of identification and
comparison against our principal risks. The
identification and assessment of our climate-related
risks is supported through our external consultants
and internal stakeholders, such as our supply chain,
health & safety and legal functions. The contribution
of several internal and external stakeholders allows us
to identify a range of potential threats and any
emerging threats, allowing additional preparedness
to support decision making.
We intend to further analyse our ‘Moderate’ and
‘Significant’ risks using quantitative methodologies to
further our assessment of the potential financial
implications and any required adjustments to our
mitigation strategies that should be developed to
address and minimise these impacts. We will also
assess our climate-related physical risks in the
context of our existing disaster recovery plans and
business continuity arrangements. Given the nature
of IQE’s business where product qualification
requirements can be prohibitive in quickly transferring
production from one manufacturing site to another,
the Group will need to develop appropriate
contingencies and plans to address the risks of
climate-related disruptions. As noted above and in
the Risk Report on page 64, the Group’s assessment is
that climate-related risks are minor in the short to
medium term and moderate over the longer term.
Managing climate-related risks
Against a challenging business backdrop, this year
we have made good progress in identifying the key
climate-related risks that are likely to impact IQE.
Climate-related risks were classified as either
‘Minimal’, ‘Moderate’ or ‘Significant’ and those
classified as ‘Moderate’ or ‘Significant’ were included
in our group risk register and reported using wider risk
management processes identified on pages 62 to 67.
This process allows the proper prioritisation of risks
and ensures that the significance of climate-related
risks is considered in relation to our non-climate-
related risks. The Group’s approach to a risk is
determined by the risk score through our probability
and impact matrix, which in term influences the
required mitigation actions required to bring the risk
score in line with the Group’s tolerances.
The Group’s climate-related risks and opportunities
are outlined on pages 55 to 59.
Metrics and targets
Our metrics and targets
In 2022 we made our commitment to achieve Net
Zero carbon neutrality across our operations by 2050
and we achieved certification for our Scope 1, Scope 2
and Scope 3 targets from the SBTi in October 2024.
We disclose our metrics relating to the reduction in
greenhouse gas emissions (GHGs) in line with the
GHG Protocol A Corporate Accounting and Reporting
Standard. Our targets for GHGs are disclosed in the
environment section on page 49 and are in line with
our SBTi commitments and we plan to develop the
costed actions to achieve these targets.
We also disclose a wide range of metrics to help us
track our progress across a number of climate-
related areas. This includes electricity consumption,
GHG emissions and water usage, as identified in the
environment section and SECR reporting on page 49.
The risk and opportunities table on pages 55 to 59
provides further information on the metrics and
targets we have identified so far and how these are
relevant to the tracking and mitigation of those risks
and opportunities.
TCFD Report continued
60
IQE Annual Report and Accounts 2024
IQE Annual Report and Accounts 2024
61
Strategic Report
Risk management
We recognise risk as an inherent part of our business
operations and we approach risk with the same
deliberate, strategic consideration as other aspects
of the business. The effective management of risk
contributes significantly to the successful delivery of
the Group’s strategic plans and objectives. The Group
Risk Committee monitors the risk environment, in
particular those risks identified as principal or
emerging risks on a regular basis, and the Audit & Risk
Committee reviews the Group’s financial controls and
systems that identify, assess, manage and monitor
Our approach and
appetite for risk
financial risks, and other internal control and risk
management systems. Please see page 76 for further
information on the Group’s review of its financial
controls. The Board is responsible for the overall
stewardship of risk management and internal control.
The Group Risk Committee considers risks using a
top-down and bottom-up approach, with the
committee members obtaining input from around
the business, which together with oversight and
support from the Audit & Risk Committee and the
The Group manages its
principal and emerging
risks through internal
subject matter
expertise and internal
processes, and relies
on the oversight of its
Group Risk Committee,
the Audit & Risk
Committee, the ESG
Committee and the
Board for broader
review and governance
of the Group’s risks. The
Group does not
currently have a
dedicated internal
audit function but key
risk-related functions,
such as Finance, Health
& Safety and Trade
Compliance, are
managed at a Group
level and conduct
audit of site-based
activities.
Board
Reports to
Audit & Risk Committee
Risk Reviews
• Regular reviews of Group’s principal risks
Risk Assurance
• Specialist functions setting policies and
performing reviews
Risk Register
• Group risk register maintained and reviewed by
Group Risk Committee
• Sites, business units and support functions provide
specific risk registers for review
Accountability
Works with
Group Risk Committee
Bottom-up reviews
Operating sites, business units, support functions, R&D
62
IQE Annual Report and Accounts 2024
Board, creates an effective system for monitoring,
planning and developing a Group-wide culture and
approach to risk. The Group Risk Committee
periodically reports to the Audit & Risk Committee on
the Group’s principal risks and the mitigating actions
being taken to address those risks.
In 2024, the Group continued the integration of its
processes for the identification, evaluation and
reporting of climate-related risks and opportunities,
as set out in the Task Force on Climate-related
Financial Disclosures statement on pages 50 to 60.
The Group was also rightly focused on the financial
impacts of the continuing softness in the broader
semiconductor industry market and the impact of
macroeconomic factors and global conflict, along
with geopolitical tensions with the potential to impact
the supplier of critical raw materials including
Gallium, Antimony and Germanium.
The Group Risk Committee is responsible for the
maintenance and regular updating of a risk register
which articulates the Group’s principal risks and the
actions being taken to address those risks. The risk
register is in a standardised format and includes the
likelihood of a risk materialising, and an assessment
of that risk both before and after the Group’s
mitigation activities.
Principal risks and uncertainties
We have mapped the Group’s principal risks and
uncertainties to a probability and impact matrix to
assist meaningful comparison of the relative
importance of those principal risks and uncertainties.
We have then included arrows to indicate the change
in the risk in comparison to the prior year’s
assessment. We have used the residual risk for the
purposes of this mapping exercise, being the
probability of the risk occurring and the potential
impact it may have, taking into account any
mitigating actions that will be implemented. The most
significant risks are shown in the top right quadrant of
the chart.
IMPACT
PROBABILITY
Strategic Report
IQE Annual Report and Accounts 2024
63
SEVERE
7
Information
technology
1
Health, safety,
security and
environment
2
Capital and
liquidity
MAJOR
8
Business
environment
9
Supply of
raw materials
MODERATE
5
International
trade compliance
6
Intellectual
property
4
Loss of key people
MINOR
3
Climate change
NEGLIGIBLE
RARE
UNLIKELY
POSSIBLE
LIKELY
ALMOST CERTAIN
1 Health, Safety, Security and Environment
Context
The Group operates a number of manufacturing sites which utilise potentially harmful
gases, materials and equipment.
Risk
• Major incident at an IQE site
Possible impact
• Injuries and potential loss of life
• Environmental harm (MATTE)
• Loss or suspension of required permits
• Disruption to operations and business activities
• Reputational damage
Mitigation
• Health and safety strategy aligned with the business’ cultural development
• Strong internal controls, including technical and engineering controls, focussing on
process safety methodologies
• Focus on process safety, barrier management and layered protection
• Continuous improvement of management systems
• Continuous auditing and monitoring of productions processes and equipment
Change in the year
• No change
2 Capital and liquidity
Context
The Group’s financial strength has been severely impacted by the prolonged
semiconductor industry-wide downturn and inventory correction cycle across key
sectors, broader macroeconomic factors and the delayed market adoption of new
technologies.
Risk
• Insufficient liquidity for day-to-day or to support the execution of IQE’s strategy
Possible impact
• Damage to business operations
• Breach of banking covenants
• Financial loss
• Reputational damage
Mitigation
• Completion of convertible loan note fundraising to provide additional short-term
liquidity
• Strategic review to realise value not currently reflected in the Group's market
capitalisation and to ensure the Group has a strong capital position for future
investment in its core operations
• Five-year plan with scenario modelling
• Annual Group and departmental budgets to define the envelope of affordability and
direct the capital management and liquidity management strategy of the business
• Monthly cash flow forecasts
• Budgetary, expenditure and cost controls
• Procurement policy
• Delegated authority policy and limits
Change in the year
• No change
3 Climate change
Context
Long-term climate-related risks to IQE’s people, operations and financial performance
Risk
• Physical risks relating to heat stress, flood risk and sea level rises and transitional risks
relating to energy security, carbon pricing and supply chain disruption
Possible impact
• Disruption to the Group’s operations
• Disruption to the operations of our customers and suppliers
• Increased production and transportation costs
• Investment to mitigate climate-related risks
Mitigation
• Development of sustainable supply chain strategy
• Development of Scope 1 and Scope 2 emissions reduction strategy
• Working with local and national government for required investments to mitigate
climate-related risks
• Alignment of IQE’s long term facility expansion and maintenance activities to
address climate-related risks
Change in the year
• Decreased risk
Risk management continued
64
IQE Annual Report and Accounts 2024
4 Loss of key people
Context
IQE’s people are fundamental to its future success and IQE operates in a highly
competitive industry for talent. Cost optimisation initiatives in recent years have
resulted in a lean workforce with some areas particularly stretched.
Risk
• Loss of key human capital capabilities
• Inability to attract talent
Possible impact
• Inability to meet business demands
• Wage inflation
Mitigation
• Development and maintenance of a positive company culture and focus on
employee wellbeing
• Regular workforce planning including talent reviews, with a focus on high potential,
high risk and single points of failure
• People development and retention plans
• Compensation to market reviews
Change in the year
• Increased risk
5 International trade compliance
Context
IQE operates across multiple jurisdictions in a highly regulated industry impacted by
extra-jurisdictional controls on products, software and technology.
Risk
• Failure to comply with international export control laws
Possible impact
• Significant regulatory fines and penalties
• Financial loss
• Damage to reputation
Mitigation
• Group-wide technology control plans
• Appropriate separation of duties and SME auditing
• Employee training
• Group-wide policies and processes to identify end use and end user
• Development of products and technology that are not impacted by international
export controls
Change in the year
• No change
Decreased risk
No change to risk
New risk
Increased risk
Trend
Key: Probability
Rare
Unlikely
Possible
Likely
Almost certain
Impact
Negligible
Minor
Moderate
Major
Severe
Strategic Report
IQE Annual Report and Accounts 2024
65
Risk management continued
6 Intellectual property
Context
The semiconductor industry is highly competitive with competing intellectual property
rights in the major jurisdictions.
Risk
• IQE infringes the intellectual property rights of a third party
• A third party infringes, or without authorisation obtains, IQE’s intellectual property
rights
Possible impact
• Loss of competitive position
• Financial loss
• Significant legal costs
• Reputational damage
Mitigation
• Implementation of robust terms and conditions to protect IQE’s intellectual property
rights
• Employee training on intellectual property rights and protecting confidential information
• Implementation of intellectual property strategies aligned to the Group’s business
strategy
Change in the year
• No change
7 Information technology & Cyber Security
Context
The Group primarily functions using its information technology systems.
Risk
• Cyber attack on the Group’s IT infrastructure
• Ransom-ware/spread of viruses or malware
• Legacy system failure or cessation
Possible impact
• System failure, data loss and sustained disruption to production operations
• Loss of business-critical data
• Financial and reputational damage
Mitigation
• Technical protection through active scanning and monitoring of the Group’s internal
and external network
• User training to improve cyber security knowledge
• Periodic testing
• Upgrading of aged IT infrastructure and devices
• Network separation
Change in the year
• No change
8 Business environment
Context
Demand from the Group’s current and future customer bases may be reduced if there
is a contraction in investment, , changes in expected customer demand, disruption
due to the geopolitical environment and/or the imposition of import tariffs or other
barriers to free trade.
Risk
• Lower demand for the Group’s products
• Increases in key cost drivers such as people, energy and raw materials
• Undermining of IQE’s diversification strategy into power and display markets
• Imposition of tariffs reduces IQE’s competitiveness and/or causes disruption to
global supply chains
Possible impact
• Decrease in sales volumes
• Increased cost of production leading to a reduction in margins if not offset by
sufficient price increases
• Failure to achieve longer-term business targets
Mitigation
• Proactive management of inflationary pressures through cost control and customer
management
• Strategic focus on key growth markets in power and display
• Focus on delivering product quality excellence to maintain IQE's position in supply chain
• Product, market and customer diversification
• The Group’s direct product and raw material input categories are currently
unaffected by recent global tariff announcements
• Contractual terms that protect IQE’s pricing/margin
Change in the year
• No change
66
IQE Annual Report and Accounts 2024
9 Supply of raw materials
Context
Geopolitical tensions have resulted in a specific risk for IQE relating to the supply of
critical compound semiconductor raw materials such Gallium, Antimony and
Germanium, where current supply chain routes are reliant on exports from China.
Risk
• Increased pricing for raw materials and substrates incorporating raw materials
• Supply chain disruption due to the imposition of export controls and/or global supply
shortages
Possible impact
• Reduction in profit margin if cost increases cannot be passed on to customers
• Manufacturing disruption due to supply shortages, potentially resulting in reduced
revenue
Mitigation
• Inventory building of key raw materials
• Working with suppliers to ensure inventory build of substrates
• Engagement with relevant government bodies and alternative material suppliers,
specifically suppliers outside of China
• Long term supply agreements to mitigate pricing fluctuations
Change in the year
• New principal risk
Global conflict
The ongoing conflicts between Russia and Ukraine and in Gaza are demonstrative of the increasingly
contested geopolitical environment. IQE has been, and will continue to be, impacted by higher energy
prices which are, in part, a result of the conflict between Russia and Ukraine. The Group has not been
materially impacted by the conflict in Gaza but continues to monitor the impact of the ongoing conflict.
Higher inflation and the higher nominal interest rates used by national governments to combat inflation
are expected to have an impact on IQE consistent with the effects felt globally.
Decreased risk
No change to risk
New risk
Increased risk
Trend
Key:
Likelihood
Low
Medium
High
Impact
Low
Medium
High
Strategic Report
IQE Annual Report and Accounts 2024
67
Viability statement
Viability statement
As required by provision 31 of the UK Corporate
Governance Code 2018, the Board has assessed the
prospects of the Company over a five-year period,
considering the Group’s current financial position,
business strategy and the results of it performing a
robust assessment of emerging and principal risks
(see pages 63 to 67).
The Board believes that a five-year period is an
appropriate time frame for assessing the Group’s
longer-term viability. This period is covered by the
Group’s strategic planning horizon and considers the
nature of the Group’s principal risks. The Board
believes that a five-year period reflects a period over
which information and forecasts concerning demand
for the development, qualification and production of
compound semiconductor wafers, is considered
reasonably reliable.
The Board’s key criteria for considering the Group’s
viability is the maintenance of a net cash position or
the ability to operate within agreed debt
arrangements, demonstrating that the Group would
be able to meet its liabilities as they fall due.
Whilst all of the risks identified on pages 63 to 67 of
this Annual Report could have an impact on the
Group’s performance, in making this assessment, the
Directors have considered the following issues which
could threaten the business model, future
performance, solvency and liquidity of the Group and
which, given the magnitude of their potential impact,
the Board considers appropriate for the purposes of
this assessment:
• The Group’s current trading performance, which
has remained subdued as the Group continues to
experience weak customer demand and low
customer orders following the global
semiconductor industry downturn
• The Group’s liquidity position, including its ability to
comply with financial covenants contained in
existing debt funding facilities and the ability to
renew, refinance or repay facilities that are due to
expire within the five-year period
• The Group’s ability to execute its strategy, including
the divestment of Group assets to repay existing
debt funding facilities and provide sufficient
funding to invest into core operations and the
diversification of the business into high growth
gallium nitride (‘GaN’) markets
The Group’s subdued trading performance, which
has resulted in a loss for the year of £38,178,000 and a
significant increase in net debt (excluding lease
liabilities and fair value gains/losses on derivative
Long-term viability
instruments) to £18,800,000, combined with a slower
than anticipated recovery in key market sectors has
prompted the Directors to initiate a Strategic Review
of the Group and take immediate actions to secure
short-term financing to strengthen the Group’s
liquidity position.
Short-term liquidity and funding actions include the
formal waiver obtained pre-year end of the
31 December 2024 financial covenant tests
applicable to the Group’s £28,000,000 multi-currency
revolving credit facility (‘RCF’), the successful
negotiation of a Deed of Amendment and
Restatement to the RCF to amend applicable
financial covenants and, the successful £18,000,000
convertible loan note fund raise completed on
10 March 2025, to provide the Group with additional
short-term liquidity whilst the Directors complete their
Strategic Review.
The Directors, as part of the Strategic Review, plan to
raise sufficient cash from the divestment of Group
assets to repay the Group’s RCF and the convertible
loan notes and ensure that the Group has a strong
capital position to further invest in its core operations.
In the first instance, this plan includes divestment
options for an IPO or sale of the Group’s Taiwan
operations where a successful divestment, at a value
commensurate with the Directors expectations, would
raise sufficient cash to repay the RCF, convertible
loan notes and provide sufficient cash to invest into
core operations and the diversification of the
business into high growth GaN markets.
Alongside the immediate steps taken to strengthen
the liquidity position of the Group, and the ongoing
steps to divest Group assets to deliver a strong and
sustainable capital position for the future, the
Directors have also taken actions to rationalise cost,
strategically reposition and consolidate the Group’s
manufacturing operations and invest in capacity and
technology asset development to support
diversification into high growth GaN related markets.
• Cost rationalisation has primarily focused on labour
savings, including restructuring of the Executive
Leadership Team (‘ELT’), operational efficiencies as
the focus of manufacturing operations is
repositioned and ongoing targeted reductions in
areas of discretionary expenditure across the
Group.
• Repositioning and consolidation of the Group’s
manufacturing operations has focused on
completing the closure of the Group’s Pennsylvania
(US) facility, with the resultant consolidation of
molecular beam epitaxy (MBE) capacity into the
68
IQE Annual Report and Accounts 2024
Group’s North Carolina (US) site, delivering
improved production efficiency and margins in the
short to medium term, and the commencement of
the consolidation of the Group’s South Wales
operations into its Newport (UK) site, delivering
improved production efficiency and margins in the
medium to long term.
• Capital investment in GaN manufacturing capacity
at the Group’s sites in Newport (UK) and
Massachusetts (US) provides capacity for growth
that is aligned with the Group’s strategy and its
technology and product roadmap. This ongoing
investment in GaN capability, including the
completed commissioning of new GaN reactors, will
underpin the Group’s diversification into high
growth advanced display and power electronics
segments of the compound semiconductor market.
Stress tests and scenario analyses to determine the
Group’s viability have been performed as part of the
assessment. In performing these tests, the Group
considered a severe but plausible downside scenario
in which the Group’s business performance is
adversely affected by a slower recovery in the
broader semiconductor industry aligned with its
going concern review and a reverse stress test
extended over the longer five-year period. This
assessment, including each individual stress test and
scenario analysis, takes account of the actions
implemented by the Directors to strengthen the
Group’s balance sheet and assumes that the
ongoing Strategic Review is successfully concluded,
with the Group raising sufficient funding from the
divesture of assets to repay existing debt and provide
sufficient funding to invest into core operations in a
manner aligned with the five-year plan. The Directors
have signed off on a plan to grow and diversify
revenues over the five-year period and are confident,
based upon the current level of external interest, that
the Group will be successful in the divestment of its
Taiwanese operations and/or the sale of other Group
assets or operations that is required to fund the plan.
The Directors acknowledge that there can be no
certainty that the divestment of Group assets or
operations can be concluded to repay existing debt,
or, that existing debt can be refinanced prior to its
expiry date if the Group is unsuccessful in divesting
assets that are sufficient to repay debt and fund the
Directors plan for the five-year period.
On the basis that the Directors expect to successfully
divest Group assets or operations at valuations that
are sufficient to repay debt and fund the Directors
plan for the five-year period, the Directors have a
reasonable expectation that the Company will be
able to continue in operation and meet its liabilities
as they fall due over the five-year period to
31 December 2029.
This Strategic Report has been approved by
the Board and signed on their behalf by:
Mark Cubitt
Executive Chair
12 May 2025
Strategic Report
IQE Annual Report and Accounts 2024
69
Board of Directors
Leading the way
Mark Cubitt
(63)
Executive Chair
Jutta Meier
(59)
Chief Executive Officer & Chief
Financial Officer
Carol Chesney
FCA (62)
Senior Independent Director
Mark Cubitt joined the IQE Board on
8 October 2024 and took over as
Executive Chair on 29 October 2024.
Mark is an accountant and has been the
Non-Executive Chair of both AIM-listed
Beeks Financial Cloud Group plc since 2016
and also Concurrent Technologies plc
since 2020. Previously, Mark was the CFO of
Wolfson Microelectronics Plc for eight
years from 2007 to 2014, and also
Non-Executive Chair of Superglass
Holdings Plc in 2015 and 2016. He has also
served as VP of Finance at Jacobs
Engineering and was Finance Director of
Babtie Group Ltd until the sale of the
company to Jacobs Engineering in 2004,
when he then took up a wider finance role
within Jacobs.
Jutta Meier joined IQE as Chief
Financial Officer in January 2024
and became Chief Executive Officer
on 29 October 2024.
Jutta is an experienced finance executive
who has held senior positions at global
semiconductor companies for over
25 years. She joined IQE in January 2024
from Intel Corporation, where she served
as a Senior Finance Director at Intel
Foundry Services, supporting Intel’s
Foundry business transformation.
Prior to joining Intel, Jutta served as Vice
President of Finance at GlobalFoundries
Inc, a global leader in semiconductor
manufacturing and she also held various
positions at Advanced Micro Devices Inc.
(AMD), a multinational semiconductor
company. She holds an MBA from
Technische Universität Dresden.
Carol Chesney joined IQE’s Board in May
2019 and was appointed as Senior
Independent Director in November 2020.
With a wealth of Board experience, Carol
also serves as a Non-Executive Director
and Audit Chair for Hunting plc, Hill & Smith
plc and Imagination Technologies Group
Limited. Previously she was Non-Executive
Director and Chair of the Audit Committee
of Renishaw plc and Biffa plc.
Until 2018 Carol served as the Company
Secretary of Halma plc, a FTSE 100 health,
safety and environmental technology
group, having also served as the group’s
Financial Controller.
Carol is a Fellow of the Institute of
Chartered Accountants in England and
Wales, and qualified with Arthur Andersen
in the UK.
R
N
A
E
N
70
IQE Annual Report and Accounts 2024
Victoria Hull joined IQE as a
Non-Executive Director in
August 2021. An experienced
Non-Executive Director,
Victoria Hull currently serves
Non-Executive Directorship
and Committee roles for a
variety of listed companies.
She is the Senior Independent
Director and Chair of the
Nominations Committee for
Hikma Pharmaceuticals plc.
Victoria is also a Non-Executive
Director and Chair of the
Remuneration Committee for
IMI plc and Serco plc. Prior to
these appointments, Ms Hull
held an executive directorship
at Invensys, now Schneider
Electric. Having worked in a
variety of global companies at
Executive Committee or Board
level, she brings an extensive
understanding of legal,
commercial and governance
matters. Victoria has a strong
background in corporate
finance and began her career
as a trainee solicitor at Clifford
Chance LLP.
Harmesh Suniara has over 15
years’ experience of working
in investment management,
with a particular focus on UK
small and mid-cap equities
including the technology and
life sciences sectors.
He brings a wealth of expertise
in active engagement with
companies that Lombard
Odier has invested in, joining
IQE’s Board in June 2023. Since
2017 he has worked as a
Portfolio Manager at Lombard
Odier 1798 Volantis, and prior to
this he was an Investment
Manager at Henderson
Volantis Capital and Gartmore
Investment Management.
Lombard Odier 1798 Volantis is
a major shareholder in IQE.
Victoria Hull
(62)
Non-Executive Director
Harmesh Suniara
(54)
Non-Executive Director
Bami Bastani has a wealth of
experience in the
semiconductor industry.
He joined IQE’s Board in
January 2024 after spending
seven years at
GlobalFoundries, first as Senior
VP and GM of the Mobile &
Wireless Infrastructure Business
Unit and then as Senior VP and
Senior Advisor to the CEO as
well as GlobalFoundries’ Board
member at the Global
Semiconductor Alliance (GSA).
Prior to GlobalFoundries Bami
held President, CEO and Board
member roles at Meru
Networks, Trident Microsystems
and ANADIGICS. Bami brings
over 42 years of
semiconductor industry
experience in conjunction with
over 20 years of experience
serving on Boards of Directors
of public and private
companies. He holds a PhD
and a Master of Science in
Solid State Electronics from The
Ohio State University and a
Bachelor of Science
in Electrical Engineering from
University of Arkansas.
Maria Marced is a highly
experienced executive within
the semiconductor sector.
She currently serves on several
boards including CEVA and
Sequans Communications and
is the Chairwoman of the GSA
EMEA Leadership Council.
Maria was the President of
TSMC Europe from November
2007 until December 2023 and
was responsible for the
strategy and management of
TSMC Europe and leading the
decision of TSMC on the EU fab.
Maria joined Philips
Semiconductors in 2003 as
Senior Vice President and
General Manager of the
Connected Multimedia
Solutions Business Unit and
later on as General Manager of
Sales and Marketing during the
transformation of Philips to
NXP.
Maria joined Philips from Intel
where she developed her
professional career over 19
years, reaching senior
positions in Europe, Middle East
and Africa as Vice President
and General Manager.
Maria holds a degree in
Telecommunications
Engineering from Universidad
Politecnica de Madrid, Spain.
Bami Bastani
(71)
Non-Executive Director
Maria Marced
(70)
Non-Executive Director
Key for Committee membership
Audit & Risk Committee
Nomination Committee
A
Remuneration Committee
R
N
Environmental, Social & Governance Committee
E
Chair of Committee
E
R
E
A
N
A
R
Governance Report
IQE Annual Report and Accounts 2024
71
I am confident the Board’s continued focus on these
areas will support IQE’s performance and its position
in the market, and will enable it to grow and embrace
its opportunities as they arise.
The Board is committed to driving IQE’s long-term
objectives and to overseeing IQE’s operations to
ensure competent and prudent management. The
approach to governance is set by the Board,
charging the Executive Leadership Team with the
responsibility to ensure that the approach is
effectively implemented across IQE’s global business.
The year 2024 was again a challenging one for IQE
and the broader global semiconductor industry. We
continued to see softness in some market segments
and a delay in expected growth in others. The global
economy continued to be challenged by higher
interest rates, inflation and conflict. IQE made
significant changes to its cost structure through 2024,
and towards the later part of the year to its Executive
Leadership Team, but continued to make steady
progress in its diversification strategy towards power
and display markets.
Board changes in 2024
I joined the Board on 2 October 2024 as a Non-
Executive Director. Americo Lemos left IQE on
28 October 2024 and, on the same date, I was
appointed by the Board as Executive Chair, and Jutta
Meier as Chief Executive Officer alongside her existing
duties as Chief Financial Officer. Phil Smith, who had
been Chair of IQE since 2019, stepped down from his
role but remained on the Board as a Non-Executive
Director until 31 December 2024.
Jutta brings her wide-ranging financial leadership
and semiconductor industry experience to bear in her
joint role as Chief Executive Officer and I am confident
that the Board is well positioned to lead the Group
through the current Strategic Review process.
Corporate Governance
Chair’s
Governance
overview
Mark Cubitt
Executive Chair
“The Board made a number
of changes to IQE’s
leadership in late 2024 and
announced a Strategic
Review designed to ensure
that the Group is well
positioned to take
advantage of future
opportunities.”
Mark Cubitt
Executive Chair
I am pleased to introduce IQE’s
Governance Report on behalf of
the Board. The Board is collectively
responsible for IQE’s long-term
success and hence committed to
conducting business responsibly,
maintaining high standards of
corporate governance, and to
aspiring to the highest levels of
quality in everything it does.
72
IQE Annual Report and Accounts 2024
Governance structure
Accountability
Delegation
Shareholders
Audit & Risk
Committee
Nominations
Committee
Remuneration
Committee
ESG Committee
Chief Executive Officer
Executive Leadership Team
Operating Sites
Business Units
Functions
Research &
Development
Responsibilities:
• Reviewing
financial
reporting and
disclosures
• Reviewing audit
effectiveness
• Assessing internal
controls and risk
management
• Advising on
external auditor
Responsibilities:
• Review
composition of
the Board
• Succession
planning for the
Board and senior
management
• Review
developments in
corporate
governance
Responsibilities:
• Evaluate
performance and
effectiveness of
Chief Executive
Officer and Chief
Financial Officer
• Review and
approve
principles of
IQE’s LTIP
• Maintaining
dialogue with
IQE’s shareholders
on remuneration
policy
Responsibilities:
• Develop and
monitor the
execution of IQE’s
ESG strategy
• Oversee the
communication
of the Company’s
ESG activities with
all stakeholders
+ See page 83
+ See page 82
+ See page 81
+ See page 76
Board evaluation
The Board has a well-established process for
undertaking an annual review of the performance of
the Board, its Committees and the Chair. We did not
complete a formal evaluation of the Board in 2024
due to the number of changes at a Board and
Executive Leadership Team level, and the Strategic
Review and proposed financing announced on
18 November 2024, which coincided with the time in
which the Board usually undertakes its annual
evaluation. On page 74 we have set out the areas
that the Board will be focused on through 2025.
I encourage all of our shareholders to engage with us
ahead of the AGM which will be held on 30 June 2025.
Notice of, and details of the arrangements for, the
AGM will be provided to shareholders at the usual time.
I am confident that the steps we have taken through
2024 will make a strong positive contribution to IQE as
we drive to achieve the vision and goals we have set.
Mark Cubitt
Executive Chair
12 May 2025
IQE Board
Governance Report
IQE Annual Report and Accounts 2024
73
IQE Annual Report and Accounts 2024
73
Role of the Board
The Board is responsible for the overall conduct of
IQE’s business and the Directors have responsibilities
under both the Company’s Articles of Association and
UK company law. The Board delegates day-to-day
management of IQE to the Chief Executive Officer and
the Executive Leadership Team.
The primary tasks of the Board in 2024 included:
Strategy
• Assessed progress against the Group’s strategy
• Overseeing the announced Strategic Review
• Regular reviews of key business decisions and their
impact on the Group’s strategy
Finance
• Oversaw the launch of the Group’s proposed
convertible loan note and the initiation of
negotiations with the Group’s bank for a revised
facility agreement
• Reviewed, approved and monitored progress
against the financial plan for the 2024 financial
year
• Monitored, challenged and approved capital
expenditure (‘capex’)
• Approved the Annual Report, half-year results
and interim trading updates
• Considered and approved IQE’s going concern
and viability statements
Leadership and people
• Changed the Chief Executive Officer and
implemented Executive roles
• Oversaw changes to the Group’s Executive
Leadership Team
Operations
• Regularly received operational, including health,
safety and environment, updates at scheduled
meetings
• Monitored performance and provided challenge
in key areas of operations
Governance and ethics
• Received and reviewed feedback from institutional
investors
• Reviewed the requirements of the 2018 UK
Corporate Governance Code and areas
of non‑conformity
• Regular meetings between the Non-Executive
Directors only
Independence
The Board considers that, with the exception of Mark
Cubitt and Harmesh Suniara, all of the Non-Executive
Directors are independent in character and
judgement and free from any business or other
relationship that could materially interfere with
exercising that judgement. Mark Cubitt was appointed
as Executive Chair on 28 October 2024. and will not be
considered as an Independent Director for so long as
he is Executive Chair. Harmesh Suniara was
appointed as the representative of Lombard Odier.
The Board is also satisfied that there is no compromise
to the independence of, and nothing which would
give rise to conflicts of interest for, those Directors
who serve as Directors on other company boards or
who hold other external appointments. The Board
considers potential for conflicts of interest at every
Board meeting and ensures that Directors present
sufficient information for those to be reviewed.
Appointment and time commitment
The Executive Chair and each of the other Non-
Executive Directors have letters of appointment.
The Executive Chair’s letter of appointment sets out
the time commitment expected of him. The other
Non-Executive Directors’ letters of appointment set
out a minimum expected time commitment but do
not set out a fixed time commitment.
The Non-Executive Directors are expected to allocate
appropriate time to IQE to perform their duties and to
make themselves available for all regular and ad hoc
meetings. The Board believes each of the Non-
Executive Directors has sufficient time to perform
their duties.
Board evaluation
The Board did not complete a formal evaluation in
2024. In the later part of 2024 the Board was focused
on transitioning the Group’s Executive leadership with
Mark Cubitt and Jutta Meier and supporting changes
to the Group’s Executive Leadership Team, as well as
the announced convertible loan note financing and
Strategic Review. The Board was rightly focused on
delivering a smooth transition and future financial
stability for the Group through a challenging business
environment. The Board intends to recommence its
usual internal evaluation processes in the second half
of 2025 once the Board has steered the Group
through its short term requirements.
Corporate Governance continued
74
IQE Annual Report and Accounts 2024
Board and Committee attendance
Board
Audit & Risk
Committee
Remuneration
Committee
Nominations
Committee*
ESG
Committee
Number of meetings in 2024
14
4
5
2
2
Attendance
Executive
Mr Mark Cubitt**
5
1
0
0
1
Ms Jutta Meier
14
3
2
0
2
Non-Executive
Mrs Carol Chesney
12
3
5
2
1
Maria Marced
13
3
5
2
1
Ms Victoria Hull
13
2
5
2
1
Bami Bastani
14
3
5
2
1
Mr Harmesh Suniara
12
3
5
2
2
*
The Nominations Committee met on an informal basis throughout the year. In particular, there were a number of meetings and
discussions relating to the appointment of a Chair-elect and the subsequent changes at an Executive level and the appointment of
Mark Cubitt as Executive Chair and Jutta Meier as CEO.
*
*
Mark Cubitt joined the Board as Non-Executive Director on 8 October 2024 and was appointed as Executive Chair on
29 October 2024.
UK Corporate Governance Code compliance
IQE complied throughout 2024 with the principles and
provisions of the UK Corporate Governance Code
2018 except in the following areas:
Provision 17
IQE does not currently maintain a succession plan for
the Company Secretary or all senior management
immediately below Board level. IQE will work to
develop such plans based on merit and objective
criteria. As part of its consideration of developed
succession plans, the Nominations Committee will
consider the linkage of its diversity objectives with
Company strategy and the gender balance of those
in senior management and their direct reports.
Provision 21
Whilst the Board does have a process for formal and
rigorous annual evaluations of the performance of
the Board and its Committees, this was not
completed in the year 2024 due to the number of
changes at a Board and Executive Leadership Team
level, and the Strategic Review and proposed
financing announced on 18 November 2024, which
coincided with the time in which the Board usually
undertakes its annual evaluation.
Provision 33
The Remuneration Committee has responsibility for
determining the policy and setting remuneration for
the Executive Directors and the Chairman. It also has
responsibility to recommend and monitor the policy,
level and structure of remuneration for senior
management. However actual remuneration for
senior management and the Company Secretary
(noting that the Company Secretary is part of the
Executive Leadership Team and senior management)
is set and determined by the CEO in consultation with
the Group’s Chief People Officer and appropriate
external advice and benchmarking.
Provision 36
Share options granted to the Executive Directors
under IQE’s Long-Term Incentive Plan (LTIP) are
subject to total vesting and holding periods of three
years, opposed to five years. In addition, Executive
Directors are subject to a minimum holding
requirement equal to 200% of their base salary and
will have a post-employment shareholding
requirement for two years. The minimum holding will
be equal to 200% of base salary in the first year
post-employment, reducing to 100% of base salary
in the second year.
IQE’s approach aligns with market practice across
IQE’s peer group on AIM and the Remuneration
Committee considers the current holding periods to
be the right balance between incentivising Executive
Directors and aligning with the interests of the
Group’s stakeholders.
A copy of the 2018 UK Corporate Governance Code is
available at frc.org.uk. The UK Corporate Governance
Code was updated in January 2024 with the 2024
Code applying for financial years beginning on or
after 1 January 2025.
Governance Report
IQE Annual Report and Accounts 2024
75
Audit & Risk
Committee
Chair’s
introduction
I am pleased to present the Report of the Audit
Committee, which provides a summary of the
Committee’s role and activities during the 2024
financial year. The Board considers the maintenance
of high standards in its governance and
management of the affairs of IQE as fundamental to
the discharging of its stewardship responsibilities.
Accordingly, both the Board and the Audit & Risk
Committee continue to keep under review IQE’s whole
system of internal control, which comprises not only
financial controls, but also business and operational
controls, compliance and risk management.
The Committee works with IQE’s internal finance
function and external auditors discussing, assessing
and challenging financial reporting and going
concern assessments. The Committee used its
structured meeting schedule to ensure that it
provides robust challenge in the areas relating to
financial reporting, internal controls and risk
management, the external auditors and other issues
pertinent to IQE.
,The Committee’s work during the year focused on
several key areas of governance:
• The Group’s available financial resources, costs and
investments, and compliance with banking
covenants
• The Group’s requirement for short-term financing
through the Strategic Review period
• The Group’s continued review and Improvement of
Its financial controls
In December 2024 the Group received a letter from
the Financial Reporting Council (FRC) noting that the
Group’s annual report and accounts to 31 December
2023 had been included in the sample for the
‘Climate-related Financial Disclosures by AIM and
Large Private Companies’ thematic review. We were
pleased to be made aware that the FRC had no
questions or queries to raise with the Group following
that review and we have implemented changes to
our climate-related reporting to align with the FRC’s
recommendations to assist users of the accounts.
The Committee has noted that the UK Corporate
Governance Code 2024 will be effective for the
Group’s financial year commencing on 1 January
2025, and its work in the year ahead will include
adopting the changes necessary to comply with the
revised Code. The Committee will also continue to
place specific focus on the Group’s financial
resources and financial controls.
Carol Chesney
Chair
12 May 2025
“The Audit Committee ensures the
integrity of our financial statements,
assesses the efficiency of our risk
management strategies and internal
controls, and reviews the
effectiveness of IQE’s external audit
process.”
Audit & Risk Committee Report
Carol Chesney
Chair
76
IQE Annual Report and Accounts 2024
Role of the Committee
The Audit & Risk Committee is responsible for
monitoring the effectiveness of IQE’s financial
reporting, internal controls and risk management
systems and processes and the effectiveness and
independence of IQE’s external auditors.
Key responsibilities
• Reviewing the effectiveness of IQE’s financial
reporting, internal control policies and procedures
for the identification, assessment and reporting of
risk
• Reviewing significant financial reporting issues and
judgements including the potential for asset
impairment and assessment of viability and going
concern
• Monitoring the integrity of IQE’s financial statements
and any formal announcements relating to IQE’s
financial performance
• Keeping the relationship with the external auditors
under review, including their terms of engagement,
fees and independence
• Reviewing and monitoring the need to establish a
dedicated internal audit function
• Advising the Board on whether the Committee
believes the Annual Report and Accounts, taken as
a whole, is fair, balanced and understandable and
provides the information necessary for
shareholders to assess IQE’s performance, business
model and strategy
• Conducting the tender process and making
recommendations to the Board, about the
appointment, reappointment and removal of the
external auditor, and approving the remuneration
and terms of engagement of the external auditor
• Reviewing and monitoring the external auditor’s
independence and objectivity
• Reviewing the effectiveness of the external audit
process, taking into consideration relevant UK
professional and regulatory requirements
• Developing and implementing policy on the
engagement of the external auditor to supply
non-audit services, ensuring there is prior approval
of non-audit services, considering the impact this
may have on independence, considering the
relevant regulations and ethical guidance in this
regard, and reporting to the Board on any
improvement or action required
• Reporting to the Board on how it has discharged its
responsibilities
Membership
• Carol Chesney – Chair
• Victoria Hull
• Bami Bastani
Carol Chesney is Chair of the Audit & Risk Committee.
Carol is a Chartered Accountant and has also held
several senior finance roles. The Board is satisfied that
Carol is the Committee member with recent and
relevant financial experience as required by the UK
Corporate Governance Code 2018. The Board is also
satisfied that the Committee as a whole, including
invited attendees as necessary, has a mix of
experience and competencies to assess the issues
facing the Group within the semiconductor industry.
Meetings and attendance
The Audit & Risk Committee meets quarterly, with
additional meetings as required. There were four
meetings in 2024 and all of the Committee members
(as at the date of the meeting) attended each
meeting, with the exception of the meeting on 4 April
2024 which Victoria Hull was unable to attend for
personal reasons.
The meetings are also regularly attended by the
Executive Chair, Chief Executive Officer & Chief
Financial Officer, Chief People Officer & General
Counsel and other senior members of the
finance team.
IQE’s external auditors attend meetings and time is
allowed at the end of each meeting for the Audit &
Risk Committee members to discuss issues with the
external auditors without management being
present. The Chair also holds at least one separate
meeting with the audit partner ahead of each
Committee meeting.
Governance Report
IQE Annual Report and Accounts 2024
77
Activities during 2024
The Committee continues to oversee a range of risk areas that are key to IQE’s long-term success and
compliance with applicable laws and regulations.
The majority of the Committee’s work derives from a structured programme that is designed to fulfil its
responsibilities as set out in its terms of reference, with additional focus areas in 2024 as set out on page 77.
The table below summarises the key activities at each meeting during 2024:
Agenda item
4 April
5 September
9 September
12 December
Review financial performance with focus on liquidity and
covenant strength
•
•
•
•
Review of financial statements, going concern assumption and
compliance with accounting standards
•
•
•
Review and recommend for approval year-end and half-year
announcements
•
Review of significant reporting issues and material judgements
•
•
•
Review of key business risks
•
•
•
Annual review of process and procedures for risk management
•
Consider requirements for internal audit function
•
Consider any material breach of law
•
•
•
Review Whistleblowing Policy and procedures for preventing
fraud, bribery and corruption
•
•
Review of insurance programme, policies and material
judgements
•
Review representation letter for full-year and half-year
•
•
Review effectiveness of Audit & Risk Committee
•
Review of auditor quality and independence
•
Consider audit effectiveness
•
Review accounting and corporate governance developments
•
Committee-only meeting with external auditor
•
•
The UK Corporate Governance Code 2018 requires the
Directors to prepare the Annual Report and Accounts
and to state that they consider them, taken as a
whole, to be fair, balanced and understandable and
provide the information necessary for shareholders to
assess IQE’s position and performance, business
model and strategy. The Board requested that the
Audit & Risk Committee advise it as to whether the
Annual Report and Accounts meet those
requirements.
This work formed part of the review of the draft
financial statements that was undertaken by the
Committee in September 2024 and April 2025.
Through consideration of reports from, and meetings
with, management and the external auditors, the
Committee has reviewed and determined the
following:
• Judgemental areas and significant matters relating
to the financial statements as set out on pages 128
to 130;
• Whether the expected future cash flows of IQE
support the carrying value of the Group’s cash
generating units, and whether there are any
triggering events which suggest any potential
impairment of other intangible assets including the
valuation of development intangibles and the
capitalisation of development costs; and
• Whether the presentation of the financial
statements, including the presentation of adjusted
performance measures, is appropriate and
balanced.
Through consideration of reports by independent tax
specialists assessing IQE’s tax affairs in the UK, the US,
and Taiwan, as appropriate, and consideration of
reports by and meetings with management
assessing current and deferred tax accounting, the
Committee has reviewed and determined whether
the provision for tax liabilities, and the current and
deferred tax accounting is appropriate.
The Committee has reviewed the resources available
to IQE, taking account of IQE’s trading and cash flow
forecast together with available funding headroom to
assess the appropriateness of the going concern
assumption.
Significant matters relating to the financial
statements
The Committee performs a review of significant
matters that relate to the financial statements. The
matters that the Committee considers are significant
are set out below:
• Going concern and the appropriateness of the
disclosure contained within the significant
accounting polices note relating to the application
of the going concern basis of accounting in the
financial statements;
Audit & Risk Committee Report continued
78
IQE Annual Report and Accounts 2024
KPMG LLP
2024
£’000
2023
£’000
Fees payable to the Company’s auditor and its associates for the audit of parent
company and consolidated financial statements
720
671
Additional fees payable in relation to the audit of the parent company and
consolidated financial statements for the years ended 31 December 2023 and 2022
25
134
Fees payable to Company’s auditor and its associates for other services:
• The audit of the Company’s subsidiaries
25
25
• Audit-related assurance services
51
-
• Tax and other advisory services
-
-
Total KPMG LLP (Group auditors)
821
830
• Compliance with financial covenants contained
within the Group’s committed bank facilities and
the associated availability of the Group’s bank
facilities;
• Impairment review of cash generating units and
the revenue growth rates and discount factors
applied in business unit value in use calculations
that support the carrying value of the Group’s cash
generating units;
• Identification of the Group’s cash generating units
and the allocation of revenue, assets, costs and
impairment to each cash generating unit;
• Intangible development cost carrying values and
associated markets, end use applications and
customer demand for the technologies which
support asset carrying values;
• Revenue recognition and any judgements
associated with the satisfaction of performance
obligations for significant transactions; and
• Presentation and disclosure of adjusted
performance measures including appropriate
clarity of reconciliation between each GAAP and
non-GAAP measure.
External Auditors
The Audit & Risk Committee has developed an auditor
independence policy. In accordance with this policy,
the Committee oversees the relationship with the
external auditors and monitors all services provided
by them and all fees payable to them. This is to
ensure that potential conflicts of interest are
considered and that an independent, objective and
professional relationship is maintained.
The Committee has a policy on the provision of
non-audit services by the external auditor in line with
the Financial Reporting Council’s Revised Ethical
Standard 2019. The Group has a policy prohibiting the
use of the Group’s auditors for the provision of
non-audit services other than an interim half-year
review.
The Audit & Risk Committee also monitors the
effectiveness of the external audit. Before the end of
the financial year, the Committee receives a detailed
audit plan from the auditors that identifies the
auditors’ assessment of the key risks and their
intended areas of focus. This is agreed with the
Committee to ensure that the scope and coverage of
audit work is appropriate. IQE’s management also
provides the Committee with feedback on the
effectiveness of the audit and the quality of the audit
firm and lead audit partner.
In addition, the Group’s auditors are required to make
a formal report to the Audit & Risk Committee
annually on the safeguards that are in place to
maintain their independence and the internal
safeguards in place to ensure their objectivity.
A resolution to reappoint KPMG will be proposed at
the forthcoming Annual General Meeting.
Internal audit and controls
The Audit & Risk Committee reviewed the
effectiveness of IQE’s system of internal controls and
risk management activities bi-annually as part of the
half-year and full-year public reporting.
The system of internal control comprises those
controls established in order to provide assurance
that IQE’s assets are safeguarded against
unauthorised use or disposal, and to ensure the
maintenance of proper accounting records and the
reliability of financial information used within the
business or for publication.
The key procedures that IQE has established with a
view to providing effective internal control include the
following:
• A clearly defined organisational structure and
limits of authority;
• Corporate policies and procedures for financial
reporting and control, project appraisal, human
resources, quality control, health and safety,
information security and corporate governance;
• The preparation of annual budgets which require
approval from the Board and the delivery of
regular financial forecasts to the Board;
• The monitoring of performance against budget
and forecasts and the reporting of any variances
in a timely manner to the Board;
• Regular review and self-assessment of IQE’s risks,
taking steps to monitor and mitigate these
wherever possible;
• Where appropriate, taking out insurance cover; and
Governance Report
IQE Annual Report and Accounts 2024
79
• Approval by the Audit & Risk Committee of audit
plans and, on behalf of the Board, receipt of reports
on IQE’s accounting and financial reporting
practices and its internal controls together with
reports from the external auditors as part of their
normal audit work.
This process remained in operation for the year under
review and as part of that process, management
reports any material exceptions to the Audit & Risk
Committee.
In the current year, the Group has continued to focus
on improvements to its internal financial control
procedures, work that has included formalisation of
individual financial cycle risk assessments, process
flow documentation and key control matrices. This
work, combined with dedicated investment in finance
team resources has enabled the Group to update
and optimise its approach to financial governance
and control, implementing new and enhanced
financial controls to mitigate the occurrence of
financial reporting errors and fraud. During the year
the Committee has had regular dialogue between
financial reporting personnel, the external auditors
and members of the Committee to understand the
work that has been performed and the changes to
financial controls that have been implemented. The
Committee is pleased with the output of the work
performed, something that has been evident from
the reduction in volume and frequency of period-end
financial adjustments and the formal documentation
of the Group's financial cycle risks, processes flows
and controls. The Committee will continue to have a
strong focus on financial governance and control in
2025, ensuring that the improvements implemented
in the current year are maintained and remain
embedded as 'business as usual' in the day-to-day
operations and financial management of the Group.
The Group relies on a range of legacy IT systems and
software to support its day-to-day operations which
are not fully integrated, a position that is managed
from a financial governance and control perspective
via manual processes which have been enhanced
during the current year. The longer-term objective of
the Group is to update, consolidate and integrate IT
systems and software, increasing automation,
control, and efficiency. This objective has initially been
focused on the Group’s manufacturing systems with
upgrades and integration of financial systems
planned as part of wider enterprise resource planning
(ERP) system enhancements in the medium term.
IQE does not have an independent internal audit
function, however it does operate internal audit on an
ad hoc peer review basis, with a scope of evaluating
and testing IQE’s financial control procedures. The
Committee considers that this remains appropriate
for IQE’s size and geographical spread, but the
Committee keeps this under constant review. In
completing its review of the effectiveness of IQE’s
system of internal controls the Audit & Risk
Committee has taken account of any material
developments up to the date of the signing of the
most recent financial statements. In addition,
recognition is given to the external audit findings,
which help to inform the Audit & Risk Committee’s
views of areas of increased risk.
Risk Management
The Group Risk Committee identifies, reviews,
assesses and tracks IQE’s key risks and mitigating
actions. The Group Risk Committee documents its
approach through a risk register which is shared and
discussed with the Audit & Risk Committee.
Key risk management activities performed by IQE are
summarised on page 62. The Committee takes an
active role in the risk management process that
includes a regular review of IQE’s risk register and
‘deep dives’ into specific areas of risk. The Audit & Risk
Committee has been particularly focused on the
Group’s financial and liquidity risks through 2024.
IQE’s principal risks and uncertainties are set out on
pages 63 to 67. While many of the key risks identified
recur from year to year, the relative importance
evolves over time and may require IQE to refocus its
assurance activities. In the year ahead, the
Committee will continue to work with the Board,
Executive Leadership Team and other senior
management to ensure that there is appropriate
focus on the most significant risk areas together with
the associated plans for mitigating their impact.
Anti-bribery and corruption
IQE maintains a zero-tolerance approach to corruption.
It has an established Anti-bribery and Corruption Policy,
which includes guidance on the giving and receiving of
gifts and hospitality. This policy applies throughout IQE’s
business. A Gifts and Hospitality Register is maintained
to ensure transparency.
Whistleblowing
IQE operates a confidential reporting mechanism,
overseen by IQE’s Chief People Officer & General
Counsel, which enables employees to raise concerns
of malpractice, non-compliance or unethical
conduct. The options for raising concerns are widely
communicated to employees. These channels are
clearly set out in IQE’s Whistleblowing Policy. Any
whistleblowing reports are confidentially reported
tothe Audit & Risk Committee. IQE’s reporting policy
and procedures provide a framework for protected
disclosure.
Audit & Risk Committee Report continued
80
IQE Annual Report and Accounts 2024
Nominations Committee Report
The Nominations Committee has overseen several
changes to IQE’s Board in recent years. In 2024, the
Nominations Committee initiated a search for a new
Chair which concluded with my appointment as a
Non-Executive Director and ‘Chair Elect’. I became
Executive Chair on 29 October 2025 and am
confident that my partnership with our CEO and CFO,
Jutta, will provide the Group with the right amount of
support through our current Strategic Review. The
Nominations Committee has not yet initiated a
search for a new permanent CEO.
The Committee was also involved in succession
planning for the Executive Leadership Team
departures, supporting the departure of several
executives and the appointment of existing members
of the Executive Leadership Team into broader roles.
The Committee engaged Lygon Group to assist with
the search for the new Chair.
Role of the Committee
The Nominations Committee is responsible for
leading the process for the selection and
appointment of Directors and for ensuring plans are
in place for an orderly succession of Board and senior
management positions.
Key responsibilities
• Review the structure, size and composition
(including the skills, knowledge, experience and
diversity) of the Board and make recommendations
to the Board with regard to any changes
• Identify, evaluate and recommend candidates for
appointment as Directors
• Succession planning for Directors and other senior
management
• Review developments in law, regulation and best
practice relating to corporate governance and
make recommendations to the Board on
appropriate action
Membership
• Mark Cubitt - Chair
• Carol Chesney
• Victoria Hull
Meetings and attendance
The Committee meets regularly on an ad hoc basis,
often following the conclusion of scheduled Board
meetings. All members attended each meeting.
Mark Cubitt
Committee Chair
12 May 2025
Nominations
Committee
Chair’s
introduction
“The Nominations Committee is
dedicated to sourcing and securing
top-tier global talent. Our strong
Board will be instrumental to
achieving IQE’s long-term goals,
leveraging their deep industry
knowledge, technical experience
and diverse skill sets.”
Mark Cubitt
Chair
Governance Report
IQE Annual Report and Accounts 2024
81
The ESG Committee is responsible for developing and
monitoring the execution of IQE’s sustainability
strategy and the communication of IQE’s activities
with our stakeholders. The ESG Committee is also
responsible for monitoring the Board’s engagement
with IQE’s people, with Victoria Hull and Bami Bastani
acting as the Board’s workforce representatives.
The ESG Committee is working with the Executive
Leadership Team and colleagues within IQE to
develop IQE’s sustainability strategy. In 2024, the
Committee was focused in supporting management
with the development of the Group’s first report under
the Task Force for Climate-related Financial
Disclosures and in the development of the Group’s
targets for the Science-Based Targets initiative, which
the Group committed to in May 2022.
The Committee was pleased that the Group’s
emissions reduction targets were approved by the
SBTi in late 2024 and looks forward to working with
management in 2025 to further develop the Group’s
transition plans.
Role of the Committee
The ESG Committee is responsible for developing and
monitoring the execution of IQE’s ESG strategy and
the communication of that strategy to IQE’s
stakeholders.
“IQE achieved approval for its near
and long-term science-based
emissions reduction targets from the
Science-Based Targets initiative
(SBTi) in 2024, a significant milestone
in our journey to being Net Zero
across our operations by 2050.”
Key responsibilities
• Ensure that IQE has a fit-for-purpose ESG strategy
and drive momentum behind the development
and implementation of that strategy
• Be responsible for communicating IQE’s position
on Environmental, Social and Governance issues
• Ensure that the strategy meets IQE’s short- and
long-term business objectives
• Review the effectiveness of the strategy and the
governance for its successful delivery
• Approve ESG reporting and specifically any
reporting and data included in IQE’s Annual Report
• Report to the Board about the Committee’s work
and progress against the strategy
Membership
• Mark Cubitt – Chair
• Maria Marced
• Bami Bastani
Meetings and attendance
The ESG Committee aims to meet at least twice a
year. In 2024 the Committee met twice, in May and
November. The first meeting was chaired by Phil
Smith and the second meeting was chaired by Mark
Cubitt*.
Mark Cubitt
Committee Chair
12 May 2025
ESG
Committee
Chair’s
introduction
ESG Committee Report
Mark Cubitt*
Committee Chair
*
Mark Cubitt joined the Board on 8 October 2024.
82
IQE Annual Report and Accounts 2024
Remuneration
Committee
Chair’s
introduction
“On behalf of the Board, I present the
Remuneration Report for the year
ended 31 December 2024.”
Directors’ Remuneration Report
Victoria Hull
Non-Executive Director and Chair
of the Remuneration Committee
2024 incentive awards and outturns
The Committee engaged in extensive consultation
with shareholders in 2024 covering changes to the
approach to incentivising Executive Directors and
senior management. The Committee wishes to thank
shareholders for their engagement and feedback.
Ultimately, IQE decided not to proceed with the
proposed changes and given that awards under the
Company’s Long-Term Incentive Plan (LTIP) had not
been concluded at the time of Americo Lemos’
departure in late October 2024, and the immediate
need to ensure that Jutta Meier was appropriately
incentivised in her new role as CEO at a time when
the Company was commencing a strategic review, a
one-off award of nominal-priced share options with
a face value equal to 34.46% of her salary was
granted to Jutta on 28 November 2024. The award will
vest after three years subject to the Remuneration
Committee’s assessment of the Group’s financial
performance over that period.
There was no bonus for the Executive Directors for the
year 2024 and any share options that were due to
vest in 2024 have lapsed based on financial
performance.
Executive changes and short-term
incentives
Americo Lemos, Chief Executive Officer, departed the
Company on 28 October 2024. Americo received a
payment in lieu of notice equal to his contractual
notice period for his basic salary and accrued
holiday. The Company remains in discussion with
Americo Lemos relating to the terms of his departure.
Jutta Meier, who joined the Board as Chief Financial
Officer on 22 January 2024, became CEO & CFO and
Mark Cubitt, who had joined the Board on 8 October
2024 as Non-Executive Director and Chair-elect,
became Executive Chair. Given the initial interim
nature of their appointments, the Committee did not
immediately increase their fixed remuneration at the
time of their appointment into these roles and
instead agreed to award them additional payments
to compensate them for their significantly increased
responsibilities over the period from November 2024
to April 2025. Further details are contained in the
report below.
2025 remuneration
In light of the ongoing increase in their responsibilities
following the leadership changes in late 2024, the
Committee determined that the base salary for Jutta
(as combined CEO & CFO) should be increased to
£425,000 (26% below the salary of her predecessor)
and the base salary for Mark (as Executive Chair)
would increase to £200,000. Both increases are
effective from 1 May 2025. Mark’s base remuneration
has been calculated on the basis that the current
demands of the role require that he work on average
for 2 days a week for the Company. The Committee
will periodically review Mark’s role as Executive Chair
and the appropriate timing for him to return to a
Non-Executive Chair role.
At the time of writing this report, the Committee was
still assessing the long-term incentive arrangements
for the Executive Directors and anticipates that the
applicability of any annual bonus opportunity will be
reviewed later in the year.
Victoria Hull
Non-Executive Director and Chair
of the Remuneration Committee
12 May 2025
Governance Report
IQE Annual Report and Accounts 2024
83
Remuneration at a glance
Purpose and link
to strategy
Key features
Implementation in
2024
Salary
Supports the
attraction and
retention of the best
global talent with
capability to deliver
IQE’s strategy.
Reviewed annually
Salaries take account of external market and
internal employee context.
No increase for the CEO
& CFO although Jutta
was paid an additional
allowance of £62,500 to
reflect her significantly
increased
responsibilities over the
period from November
2024 to April 2025.
Average pay increases
for the wider workforce
were c.3%.
Allowance and
benefits
Provision of market-
competitive and
cost-effective
benefits to support
attraction and
retention of talent.
Provision of competitive benefits linked to local
market practice.
Maximum Company pension contribution is 10%
of salary.
Allowances and
benefits unchanged
from prior year.
Annual
incentive
Incentivises delivery
of IQE’s financial and
strategic targets.
Provides focus on
key financial metrics
and the individual’s
contribution to IQE’s
performance.
Maximum is 120% of salary with 50% of the
maximum payable for target performance.
Performance measures, weightings and
stretching targets set annually.
Normally paid in cash after end of the financial
year, save that any payout above 100% of salary
will normally be made in the form of share grant.
Subject to malus and clawback provisions.
There was no 2024
annual bonus payout
for the CEO & CFO.
Long-term
incentives
Provides alignment
with shareholders by
ensuring a
significant
percentage of
remuneration is
delivered in shares
and rewards
long-term
performance in line
with IQE’s strategy.
Normal annual awards of up to 200% of salary
may be granted under IQE’s LTIP.
The normal maximum award may be exceeded
in exceptional circumstances, such as
recruitment.
Three-year performance period.
Performance measures, weightings and
stretching targets reviewed annually.
Subject to malus and clawback provisions.
The CEO & CFO was
granted a one-off
award of nominal-
priced share options
with a face value equal
to 34.46% of her salary
on 28 November 2024.
Vesting is subject
to the Committee’s
assessment of financial
performance over the
vesting period.
Shareholding
requirement
Ensures alignment
between the
interests of
Executive Directors
and shareholders.
Minimum shareholding requirements:
• CEO 200% of salary
• CFO 200% of salary
New joiners given time to reach threshold and
not expected to self-fund.
CEO & CFO
shareholding as at
31 December 2024 -
nil.
Directors’ Remuneration Report continued
84
IQE Annual Report and Accounts 2024
IQE aims to attract, retain and motivate high calibre
executives in a highly competitive global industry,
whilst recognising the need to be cost effective, and
to incentivise significant industry out-performance.
The Remuneration Committee established the
current Remuneration Policy with the aim of
balancing these factors, taking account of investor
feedback and prevailing best practice.
This Policy section of the Directors’ Remuneration
Report sets out the Policy for Executive Director
remuneration which the Committee intends to
operate for 2025. As an AIM quoted company, IQE is
not required to put its Policy to a binding shareholder
vote, however, in developing the new Policy, the
Committee has sought to comply with the main best
practice expectations for UK companies while
ensuring the Policy is sufficiently competitive
compared to IQE’s sector, talent markets and
ambitions for growth.
Directors’ Remuneration
Policy
Function
Operation
Opportunity
Performance metrics
Base salary
To recognise
the individual’s
skills and
experience and
to provide a
competitive
total package
Base salaries are
normally reviewed
annually, with reference
to market levels,
individual contribution,
the experience of each
Executive and increases
across the Group. Any
adjustments normally
become effective on
1 April.
It is anticipated that salary
increases will normally be no
higher than those of salaried
employees as a whole. In
exceptional circumstances
(including, but not limited to,
a material increase in job
size or complexity, material
market misalignment) the
Remuneration Committee
has discretion to make
appropriate adjustments to
salary levels to ensure they
remain appropriate.
n/a
Pension
To provide an
opportunity for
Executives to
build up income
on retirement.
All Executives are
members of the Group
pension scheme and/or
receive a cash pension
allowance. Salary is the
only element of
remuneration that is
pensionable.
Executive Directors receive a
pension contribution of 10%
of salary or an equivalent
cash allowance. This aligns
with the pension
arrangements for IQE’s
employees who can receive
matching contributions from
IQE of up to 10% of salary.
n/a
Given recent changes to the Executive and senior
leadership within the Group, the Committee is
committed to ensuring that their total reward is
competitive in the Company’s global marketplace
and that the Executive and senior leadership are
incentivised and rewarded for providing exceptional
performance aligned with the Group’s strategic
objectives.
Governance Report
IQE Annual Report and Accounts 2024
85
Function
Operation
Opportunity
Performance metrics
Benefits
To provide
non-cash
benefits which
are competitive
in the market in
which the
Executive is
employed.
Executives receive benefits
which consist primarily of
health cover, life
assurance, long-term
disability insurance and
reimbursement for fuel,
although may include
other benefits that the
Remuneration Committee
deems appropriate in the
circumstances.
Relocation and
expatriation-related
benefits may also be
provided where
appropriate.
Benefits may vary according
to role and individual
circumstances. Eligibility for
benefits and the cost of
benefits are reviewed
periodically.
The cost of benefits is
dependent on market rates
and is not capped.
n/a
Annual Bonus
To incentivise
and reward
strong
performance
against
financial and
personal
annual targets,
thus delivering
value to
shareholders
and being
consistent with
the delivery of
the strategic
plan.
Performance measures,
targets and weightings
are set at the start of the
year.
The scheme is based on
a combination of
financial performance
and personal objectives.
At the end of the year,
the Remuneration
Committee determines
the extent to which the
objectives have been
achieved.
Bonus payments are
delivered in cash and
any payment above 100%
of salary will normally be
made in the form of a
share grant.
Clawback (of any bonus
paid) may be applied
during employment or
for two years post-
termination in the event
of gross misconduct,
material financial
misstatement, error in
calculation of outcomes
or in any other
circumstance that the
Remuneration
Committee considers
appropriate.
For Executive Directors, the
maximum annual bonus
opportunity will be 120% of
base salary.
The bonus pays 0% at
Threshold, 50% at Target
and 100% at Stretch, with
straight-line vesting
between these levels.
Performance is assessed on an annual
basis against a scorecard of financial
and personal/strategic objectives set
at the start of each year.
Financial measures will be weighted
appropriately each year according to
business priorities, and will normally
represent between 70% and 100% of
the scorecard.
Personal objectives will normally have
a weighting of between 0% and 30% of
the maximum opportunity. These will
be set annually to capture expected
individual contributions to IQE’s
strategic plan. The payout for any
personal element will be reduced by
50% in the event the thresholds for a
majority of the relevant financial
measures are not met.
The Remuneration Committee has
discretion to adjust formulaic bonus
outcomes to ensure fairness for
shareholders and participants, to
ensure pay aligns with underlying
Company performance, and to
avoid unintended outcomes. These
adjustments can be either upwards
(within plan limits) or downwards
(including down to zero). The
Remuneration Committee may
consider measures outside of the
bonus framework to ensure there is
no reward for failure. Any adjustment
would be carefully considered and fully
explained in the Annual Report on
Remuneration.
Directors’ Remuneration Report continued
86
IQE Annual Report and Accounts 2024
Function
Operation
Opportunity
Performance metrics
LTIP
To provide
alignment with
shareholders
and competitive
rewards by
delivering a
significant
proportion of
remuneration in
company
shares and
incentivise
sustained
long-term
performance
that supports
the creation of
shareholder
value.
Under the Long-Term
Incentive Plan (LTIP) annual
awards of shares or
nominal-cost options may
be made to participants.
Award levels and
performance conditions
are reviewed before each
award cycle to ensure they
remain appropriate.
The Committee has the
discretion to authorise a
payment, in shares, equal
to the value of dividends
which would have accrued
on vested shares during
the vesting period.
Malus (of any unvested
LTIP) and clawback (of any
vested LTIP) may be
applied during
employment or for two
years post-termination in
the event of gross
misconduct, material
financial misstatement,
error in calculation of
outcomes or in any other
circumstance that the
Remuneration Committee
considers appropriate.
Normal awards of up to 200%
of salary may be granted
under the LTIP.
In exceptional
circumstances, including but
not limited to recruitment,
normal awards may be
exceeded.
Up to 25% of PSP awards
granted under the LTIP will be
paid for achieving Threshold
performance, normally
increasing on a straight-line
basis to full vesting for
achieving Stretch
performance.
Vesting of PSP awards granted under
the LTIP is subject to achieving
performance conditions and
continued employment.
Performance conditions are normally
measured over three consecutive
financial years with awards vesting
three years after grant.
The Remuneration Committee has
limited discretion to amend the
performance conditions provided that
the amended performance condition
is not materially easier to satisfy than
the original condition.
The Remuneration Committee has
discretion to adjust outcomes to
ensure they fairly reflect underlying
performance. The Remuneration
Committee also considers
environmental, social, governance and
health and safety criteria, to ensure
there is no reward for failure.
Notes to the Policy table
Performance measure selection and approach to
target setting:
The measures used under the annual bonus plan are
selected annually to reflect IQE’s main objectives for
the year and reflect both financial performance and
personal contributions to delivering the strategic
plan. The performance conditions for new LTIP awards
are selected to reflect IQE’s long-term objectives
which support the creation of shareholder value.
Targets applying to the bonus and LTIP awards are
reviewed annually, based on a number of internal
and external reference points. Performance targets
are intended to be stretching and achievable, and
reflect IQE’s strategic priorities and its market
opportunities.
Remuneration Policy for other employees
IQE provides all employees with a consistent package
of benefits that includes private medical insurance,
life assurance, long-term disability insurance and
reimbursement for fuel.
All employees are eligible to participate in a
discretionary annual bonus and receive awards
under the LTIP. The same principles apply to the
assessment of performance for determining the
individual component of bonuses for all employees.
For other employees, grants under the LTIP are
subject to a pre-grant minimum personal
performance condition and normally vest in annual
tranches over three years subject to the employee
remaining employed by the Group.
Shareholding guidelines
The Remuneration Committee wishes to encourage
Executive Directors to build up a significant
shareholding in the Company. Shareholding
guidelines are therefore in place to require Executive
Directors to acquire a shareholding (excluding shares
held conditionally pursuant to LTIP performance)
equivalent to 200% of base salary. 50% of any shares
vesting (post-tax) under the LTIP are required to be
held until the relevant shareholding level is achieved.
Executive Directors are expected to build up the
required shareholding within five years of
appointment to the Board, although the
Remuneration Committee will exercise appropriate
discretion where Executive Directors have been
impeded from building up the requisite shareholding
due to business performance. Details of the Executive
Directors’ current shareholdings are provided in the
Annual Report on Remuneration on page 95.
Governance Report
IQE Annual Report and Accounts 2024
87
Non-Executive Director remuneration
Non-Executive Director
Date of appointment letter
Remuneration per annum
Carol Chesney
13 May 2019
£50,000
Victoria Hull
1 August 2021
£50,000
Bami Bastani
1 January 2024
$62,000
Maria Marced
1 January 2024
€57,000
Harmesh Suniara*
30 June 2023
£50,000
*
Harmesh Suniara is the representative for Lombard Odier who receive a fee of £50,000 per annum equivalent to the Group’s
standard Non-Executive Director fee.
Subject to re-election by shareholders, Non-Executive Directors are appointed by the full Board and retire annually in accordance with
the Company’s Articles of Association. The remuneration of Non-Executive Directors is a matter reserved for the full Board, subject to an
individual limit of £150,000 per annum or such other figure as shareholders may approve plus reasonable expenses in accordance with
the Company’s Articles of Association.
The Non-Executive Directors are not eligible to participate in IQE’s performance-related bonus plan, long-term incentive plans or
pension arrangements. Copies of the Non-Executive Directors’ appointment letters are available for inspection at the Company’s
registered office during normal business hours.
2025 Executive Director remuneration
Mark Cubitt
Jutta Meier
*
LTIP value calculated based on market value of the options at the date of grant less the nominal grant price.
For illustrative purposes given that the actual 2025 LTIP award levels have not yet been determined, the chart
assumes 2025 LTIP grants at the normal maximum limit of 200% of salary for the CEO & CFO and 50% of salary
for the Executive Chair. The ‘Minimum’ scenario comprises fixed remuneration, i.e. base salary, pension, and
benefits, which are the elements of the remuneration package not linked to performance. The figures for base
salary and pension (10% of salary) are as of 1 May 2025, while those for taxable benefits are based on the latest
single figure table for 2024. Mark Cubitt is not entitled to pensions or other benefits. The ‘On-Target’ scenario
reflects fixed remuneration as above and threshold vesting for the PSPs of 20% of maximum. The ‘Stretch’
scenario reflects fixed remuneration plus full vesting of LTIPs. The ‘Stretch + 50%’ reflects the ‘Stretch’ scenario
plus an assumed 50% share price appreciation over the LTIP performance period. We have assumed that there
will be no annual bonus for 2025.
Minimum
On target
Stretch
Stretch 50%
Minimum On target Stretch Stretch 50%
£220k
£300k
£350k
£200k
Fixed pay
£1,328k
£648k
£1,753k
£478k
Annual bonus
LTIP
(£k)
£0.5m
£1m
£1.5m
£2m
£2.5m
£3m
Directors’ Remuneration Report continued
88
IQE Annual Report and Accounts 2024
Approach to recruitment remuneration
External appointments
When hiring or appointing a new Executive Director from outside the Company, the Remuneration Committee
may make use of all the existing components of remuneration, as follows:
Component
Approach
Base salary
The base salaries of new appointees will be determined by reference to relevant market data,
experience and skills of the individual, internal relativities and current basic salary. Where new
appointees have initial basic salaries set below market, any shortfall may be managed with
phased increases over multiple years subject to the individual’s development in the role.
Pension
New appointees will receive pension contributions or an equivalent cash supplement in line
with existing policy.
Benefits
New appointees will be eligible to receive benefits which may include those outlined in the
policy table but may also include additional benefits consistent with market practice in their
home location (if based outside of the UK).
Annual Bonus
The structure described in the policy table will apply to new appointees with the relevant
maximum being pro-rated to reflect the proportion of employment over the year. Targets for
the personal element will be tailored to each executive.
LTIP
New appointees will be granted awards under the LTIP on the same terms as other executives,
as described in the policy table.
In determining the appropriate remuneration for a
new Executive Director appointee, the Remuneration
Committee will take into consideration all relevant
factors (including nature and quantum of each
component of remuneration and the jurisdiction from
which the candidate was recruited) to ensure that
arrangements are in the best interests of IQE and its
shareholders. The Remuneration Committee may
make an award in respect of a new appointment to
‘buy out’ remuneration arrangements forfeited on
leaving a previous employer.
This may be granted in addition to the ongoing
remuneration elements outlined in the table above. In
doing so, the Remuneration Committee will consider
relevant factors, including the value and form of the
award, time to vesting, performance conditions
attached to awards, and the likelihood of these
conditions being met.
Any ‘buyout’ awards will typically be made under the
existing annual bonus and LTIP schemes, although in
exceptional circumstances the Remuneration
Committee may make awards using a different
structure.
Any ‘buyout’ awards would have a fair value no
higher than the awards forfeited.
Internal appointments
Internal promotions to the Board will be appointed on
terms in line with the Policy. Any existing entitlement
made prior to their appointment to the Board, which
are not consistent with the Policy may be allowed to
continue on their original terms.
Non-Executive Directors
In recruiting a new Non-Executive Director, the
Remuneration Committee will utilise the Policy as set
out on pages 85 to 90.
Service contracts and treatment for leavers
and change of control
Executive
Date of service contract
Mark Cubitt (Executive Chair)
7 October 2024
Jutta Meier (CEO & CFO)
22 January 2024
Executive Director service contracts, including
arrangements for early termination, are carefully
considered by the Remuneration Committee. Each of
the Executive Directors has a rolling service contract
requiring six months’ notice of termination on either
side. Such contracts contain no specific provision for
compensation for loss of office, other than an
obligation to pay for any notice period waived by the
Company, where pay refers to salary, benefits and
pension only. Executive Directors’ service contracts
are available to view at the Company’s registered
office.
When considering exit payments, the Remuneration
Committee reviews all potential incentive outcomes
to ensure they are fair to both shareholders and
participants. The table below summarises how the
awards under the annual bonus and LTIP are typically
treated in different circumstances, with the final
treatment remaining subject to the Remuneration
Committee’s discretion:
Governance Report
IQE Annual Report and Accounts 2024
89
Reason for leaving
Calculation of vesting/payment
Annual bonus
Resignation
No annual bonus payable.
‘Good leaver’1
Cash bonuses will typically be paid to the extent that performance objectives have
been met. Any resulting bonus will typically be pro-rated for time worked. The
Remuneration Committee retains discretion to vary this treatment in individual
circumstances.
Change of control
Resignation
Outstanding awards lapse.
LTIP
‘Good leaver’* and
change of control
The Committee determines whether and to what extent outstanding awards vest
based on the extent to which performance conditions have been achieved and the
proportion of the vesting period worked. The Remuneration Committee retains
discretion to vary this treatment in individual circumstances.
The determination of vesting will be made as soon as reasonably practical following
the end of the performance period or such earlier date as the Remuneration
Committee may agree (within 12 months in the event of death).
In the event of a change of control, awards may alternatively be exchanged for new
equivalent awards in the acquirer where appropriate.
*
A ‘good leaver’ is a participant ceasing to be employed by the Group by reason of death, disability, ill health, retirement in
agreement with the Company or any other reason that the Committee determines in its absolute discretion.
External appointments
With the approval of the Board in each case,
and subject to the overriding requirements of the
Group, Executive Directors may accept external
appointments as Non-Executive Directors of other
companies and retain any fees received. None of the
Executive Directors received any remuneration from
external directorships during the year.
Consideration of conditions elsewhere in
the Company
When making decisions on changes to Executive
Director remuneration, the Remuneration Committee
considers changes to pay and conditions across the
Group. To this end, the Remuneration Committee
receives a summary of the proposed level of average
increase for employees prior to the annual salary
review. For Executive Directors, the Remuneration
Committee does not formally consult with employees
on the Executive Remuneration Policy and
implementation.
Consideration of shareholder views
The Remuneration Committee maintains a regular
dialogue with the Company’s major shareholders.
During 2024 and early 2025, the Committee engaged
extensively with investors on the terms of Executive
Director and senior leadership remuneration, with the
feedback received on the quantum and conditions
used by the Committee in its discussions with the
Executive Directors.
Directors’ Remuneration Report continued
90
IQE Annual Report and Accounts 2024
Role of the Committee
The Remuneration Committee has responsibility
for determining the policy for Executive Director
remuneration and setting remuneration for the
Company Chair and Executive Directors.
Key responsibilities
• Recommending the remuneration policy for
Executive Directors, whilst considering the
remuneration for the Executive Leadership Team
and remuneration policies for employees below the
Board
• Approving the principles of IQE’s long-term
incentives and the parameters, including
performance conditions, for the annual awards
under long-term incentives
• Maintaining appropriate dialogue with shareholders
on remuneration matters
• Preparing the annual remuneration report to
shareholders to show how the remuneration policy
has been implemented.
Membership
• Victoria Hull – Chair
• Carol Chesney
• Maria Marced
Changes to Committee Membership
Phil Smith stepped down as a Non-Executive Director
on 31 December 2024 and left the Committee at the
same time.
For details of attendance at Committee meetings
during the year, please see page 75.
For the biographies of all Committee members, see
pages 70 to 71.
Meetings and attendance
The Remuneration Committee met four times in 2024,
although Committee members also met on a
number of occasions throughout the year on an
informal basis. All members attended each meeting.
The Executive Directors attended meetings to discuss
proposed performance ratings for the Executive
Directors and the Executive Leadership Team and
remuneration policy’s principles for the workforce. The
Executive Directors did not attend those parts of the
Committee meetings relating to the Committee’s
decisions on their own performance and
remuneration.
Annual Report
on Remuneration
Remuneration Committee role,
membership and advice
The primary role of the Remuneration Committee is to
determine and agree with the Board fair and
reasonable remuneration arrangements for the
Chairman and Executive Directors. The main activities
of the Remuneration Committee during the year were
as follows:
• Evaluated the performance of the former Chief
Executive Officer;
• Determined one-off allowances for the Executive
Directors and Executive Leadership Team following
the departure of the previous Chief Executive
Officer and several other senior leaders in late 2024;
• Assessed the annual bonus outcomes for the
Executive Directors and the Executive Leadership
Team in 2023;
• Reviewed salary increases for IQE’s employees,
including the Executive Directors and the Executive
Leadership Team, ensuring fairness with the wider
workforce;
• Determined a one-off share option award to Jutta
Meier;
• Considered proposed workforce policies on
performance rating and workforce pay increases;
• Drafted the Directors’ Remuneration Report; and
• Considered benchmarking and advice from
independent remuneration consultants, Mercer.
The Remuneration Committee’s Terms of Reference
are set out on the Company’s website at www.iqep.
com.
Mercer provides independent advice to the
Remuneration Committee. Mercer is a signatory to
the Code of Conduct for Remuneration Consultants in
the UK, operated by the Remuneration Consultants
Group, and which requires all advice to be objective
and independent (see www.
remunerationconsultantsgroup.com for more
information).
Fees of £54,898 inclusive of VAT were paid to Mercer
in respect of services it provided to the Company in
2024. The Committee considers that Mercer is
independent, does not have any connections with IQE
that may impair their independence, and does not
provide any services to the Group other than its
advice on remuneration.
Governance Report
IQE Annual Report and Accounts 2024
91
Board changes
Americo Lemos left IQE as Chief Executive Officer on
28 October 2024. Under the terms of this departure,
Americo received his contractual payment in lieu of
notice equal to his basic salary and his accrued
holiday. The Company remains in discussion with
Americo Lemos relating to the terms of his departure.
Mark Cubitt, who joined the Board as Non-Executive
Director and Chair-elect on 8 October 2024, became
Executive Chair on 29 October 2024. Mark received a
one-off additional allowance of £87,500 to reflect his
significantly increased role and workload as Executive
Chair, which was paid at the end of April 2025, and is
Single total figure of remuneration for Executive Directors (audited information)
The table below sets out a single figure for the total remuneration received by each Executive Director for the
year ended 31 December 2024 and the prior year:
Mr Americo Lemos6
Mr Tim Pullen5
Mrs J Meier7,8
Mr M Cubitt9,10
Total
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Salary
479
575
–
160
284
–
22
–
785
735
Benefits1
13
16
–
5
10
–
–
–
23
21
Pension2
47
58
–
12
23
–
–
–
70
70
Other allowances
–
–
–
–
21
–
29
–
50
–
Buy out - cash3
–
400
–
–
–
–
–
–
–
400
Buy out - shares
–
–
–
–
200
–
–
–
200
–
Total fixed
539
1,049
–
177
538
–
51
–
1,128
1,226
Annual bonus
–
–
–
–
–
–
–
–
–
–
Long-term incentives4
–
–
–
–
–
–
–
–
–
–
Total variable
–
–
–
–
–
–
–
–
–
–
Total Executive
Remuneration
539
1,049
–
177
538
–
51
–
1,128
1,226
–
–
Non-executive fees
–
–
–
–
–
–
3
–
3
–
Total Director
Remuneration
539
1,049
–
177
538
–
54
–
1,131
1,226
1.
Benefits consist of health cover, private medical insurance, life assurance, long term disability insurance, car allowance and travel
allowance.
2. Executive Directors are entitled to participate in a defined contribution scheme, in relation to which the Company contributes
10% of salary or equivalent cash allowance.
3. Cash award of £800,000 agreed as part of Americo Lemos’ recruitment arrangements. £200,000 was paid on 28 February 2022 and
£200,000 was paid on 31 July 2022. The final £400,000 was paid on 31 January 2023.
4. No long-term incentives vested.
5. Tim Pullen was entitled to payments in lieu of notice totalling £195,000 which were paid within 2023. Tim Pullen also provided the
Group with consultancy services within the year ended 31 December 2023 and was paid an aggregate amount of £75,000.
6. Americo Lemos’ annual salay was £575,000. The 2024 salary figure reflects his date of termination on 28 October 2024. He was
entitled to payments in lieu of notice totalling £288,000 of which £96,000 had been paid within the year.
7. Jutta Meier received a new starter award on 22 January 2024 with a value of £200,000(995,521 share options) with 50% to vest on
each of the two subsequent anniversary dates.
8. Jutta Meier’s annual salary is £300,000. The 2024 salary figure reflects her start date of 22 January 2024.
9. Mark Cubitt took on a Non-executive Director and Chair-elect role for the period from 8 October 2024 to 28 October 2024 with an
annual salary of £50,000. From 29 October 2024, he became Executive Chair of IQE with an annual salary of £125,000.
10. Mark Cubitt recevied a one-off additional allowance of £87,500 to reflect his significantly increased role and workload as Executive
Chair from November 2024, which will be paid at the end of April 2025. Jutta Meier received a one-off additional allowance of
£62,500 to reflect her increased role and workload as Chief Executive Officer, which will be paid at the end of April 2025. The amount
disclosed relfects the pro-rated allowance relating to the year ended 31 December 2024.
based on a three-days-a-week time commitment.
From 1 May 2025, Mark will be paid £200,000 based on
a two-days-a week time commitment. Mark does not
receive any benefits, participate in pension
arrangements and is not eligible for a bonus.
Jutta Meier, who was appointed to the Board on
22 January 2024 as Chief Financial Officer, also
became CEO on following the Executive changes.
Jutta received a one-off additional allowance of
£62,500 to reflect her significantly increased role and
workload as Chief Executive Officer, which was paid
at the end of April 2025. From 1 May 2025, Jutta will be
paid £425,000.
Directors’ Remuneration Report continued
92
IQE Annual Report and Accounts 2024
Incentive outcomes for year ending
31 December 2024
Annual bonus
The Committee was engaged in discussions with the
Executive Directors throughout much of the year on
the appropriate structure and performance targets
for the 2024 bonus. By the time Americo Lemos left
the Group in October 2024, the Committee
determined that the Group’s financial performance
for the year was likely to mean that it would not be
appropriate to pay bonuses to Executive Directors
and therefore the bonuses for 2024 were nil.
The Committee is satisfied the policy has operated as
intended and has concluded that there are no
circumstances arising where it would need to
exercise discretion to adjust any of the variable pay
outcomes.
Long-term incentive plan
The LTIP options that were awarded in 2022 with a
performance period ending on 31 December 2024
have not satisfied the applicable financial
performance measures and have lapsed in that part.
Percentage change in Executive Director
remuneration
The table below shows the percentage change in
Executive Director remuneration from the prior year
compared to the average percentage change in
remuneration for other employees. The Executive
Director annual remuneration includes base salary,
taxable benefits and annual bonus. The percentage
change in annual remuneration for other employees
is calculated using the average increase in the
earnings of all employees who were employed in the
UK throughout 2023 and 2024. The Committee
considers the UK employee population to be the most
appropriate comparison for the CEO vs. other
employee pay, as all Executive Directors are currently
employed in the UK, our UK employee population
includes employees at all levels of the organisation,
and pay inflation in our other geographies is affected
by different local market factors.
Relative importance of spend on pay
The graph below shows shareholder distributions (i.e.
dividends and share buybacks), total employee pay
expenditure and investment in capital expenditure,
research & development and intangibles for the
financial years ended 31 December 2023 and
31 December 2024.
Employee
remuneration
Costs
Distribution to
shareholders
Investment in
capex, R&D
and
intangibles
2023
£42.1m
–
£18.1m
2024
£38.6m
–
£14.8m
Decrease
(8.3%)
n/a
(18.2%)
Americo Lemos
Jutta Meier
Mark Cubitt
All UK Employees
2024
2023
Increase
2024
2023
Increase
2024
2023
Increase
Increase
Salary
479
575
0.0%
284
–
n/a
22
–
n/a
3.9%
Benefits and
pension
60
74
0.0%
33
–
n/a
–
–
n/a
53.7%
Annual bonus
–
n/a
n/a
–
–
n/a
–
–
n/a
n/a
Total
539
317
–
`
22
–
1.
Mark Cubitt took on a Non-Executive Director and Chair-elect role for the period from 8 October 2024 to 28 October 2024 with an
annual salary of £50,000. From 29 October 2024, he became Executive Chair of IQE with an annual salary of £125,000.
2. Jutta Meier’s annual salary is £300,000. The 2024 salary figure reflects her start date of 22 January 2024.
3. Americo Lemos left IQE on 28 October 2024.
Employee
remuneration
costs
Distribution to
shareholders
Investment
in capex,
R&D and
intangibles
£42.1m
£18.1m
2023
2024
(£m)
£38.6m
£14.8m
£10m
£20m
£30m
£40m
£50m
Investment in
capex, R&D
and intangibles
Distribution
to shareholders
Employee
remuneration
costs
2024
2023
£m
n/a
38.6m
42.1m
14.8m
18.1m
Governance Report
IQE Annual Report and Accounts 2024
93
Review of past performance
The following graph charts the Total Share Return (‘TSR’) of the Company and the FTSE AIM Index (of which IQE is
a member) over the period from 1 January 2019 to 31 December 2024. The table below details the Chief
Executive’s single figure remuneration over the same period.
Historical TSR performance
30
60
90
120
150
2024
2023
2022
2021
2020
2019
IQE
AIM all share
TSR (rebased to 100)
0
Historical CEO Remuneration
2020
2021
2022
2023
2024
CEO single figure of remuneration (£'000)
1,110
507
643
649
579
STI award as a % of maximum opportunity
79%
0%
0%
0%
0%
LTI award as a % of maximum opportunity
0%
0%
0%
0%
0%
The 2024 figure includes Americo Lemos’ remuneration to the date of his termination on 28 October 2024. Jutta
Meier’s remuneration is included from 29 October 2024 to 31 December 2024.
Scheme interests awarded in 2024 (audited information)
Jutta Meier received a new starter award on 22 January 2024 with a value of £200,000 (995,521 share options)
with 50% to vest on each of the two subsequent anniversary dates. Jutta was also granted 860,092 nominal
priced share options with a face value of £103,800 in late 2024. This award will vest after three years subject to
the Remuneration Committee’s assessment of the Group’s financial performance over that period.
Payment on loss of office (audited information)
Americo Lemos, Chief Executive Officer, left the Group on 28 October 2024. Under the terms of his departure, he
received payment in lieu of notice equal to his basic salary of £287,500 and accrued holiday pay of £53,078.
The Company remains in discussion with Americo Lemos relating to the terms of his departure.
Payments to past Directors (audited information)
Andrew Nelson received £26,000, under the terms of a consultancy agreement with IQE.
Single total figure of remuneration for Non-Executive Directors (audited information)
The table below sets out a single figure for the total remuneration received by each Non-Executive Director for
the year ended 31 December 2024 and the prior year:
NED fees
Other
Total
2024
£’000
2023
£’000
2024
£’000
2023
£’000
2024
£’000
2023
£’000
Carol Chesney
50
50
–
–
50
50
Sir Derek Jones
–
50
–
–
–
50
Andrew Nelson
35
75
–
–
35
75
Victoria Hull
50
50
–
–
50
50
Maria Marced
50
–
–
–
50
–
Bami Bastani
50
–
–
–
50
–
Phil Smith
112
125
–
–
112
125
Directors’ Remuneration Report continued
94
IQE Annual Report and Accounts 2024
Directors’ interests (audited information)
A table setting out the beneficial interests of the Directors and their families in the share capital of the
Company as at 31 December 2024 is set out below.
Since 1 January 2024 there have been the following changes in Directors’ interests in shares:
2024
Shares owned outright as
at 01 Jan 2024
Shares owned outright as
at 31 Dec 2024
Shareholding requirement
% salary/fee
Current shareholding %
salary/fee
Dr Andrew Nelson
44,867,587
38,835,514
n/a
n/a
Americo Lemos
9,837,469
9,837,469
200%
228%
Jutta Meier
–
–
200%
0%
Mark Cubitt
–
–
n/a
0%
Phil Smith
140,000
140,000
n/a
n/a
Carol Chesney
90,000
90,000
n/a
n/a
Victoria Hull
281,192
281,192
n/a
n/a
2023
Shares owned outright as
at
Shares owned outright as
at 31 Dec 2023
Shareholding requirement
% salary/fee
Current shareholding %
salary/fee
Dr Andrew Nelson
40,567,234
44,867,587
N/A
N/A
Americo Lemos
970,457
9,837,469
200%
419%
Tim Pullen
–
–
200%
n/a
Phil Smith
40,000
140,000
–
–
Sir Derek Jones
–
–
–
–
Victoria Hull
231,192
281,192
–
–
Carol Chesney
40,000
90,000
–
–
Directors outstanding share awards (audited information)
2024
Unvested and
subject to
continued
performance
Vested but
unexercised
Vested during
year
Lapsed during
year
Exercised
during year
Americo Lemos
–
–
–
8,815,591
–
Jutta Meier
1,855,613
–
–
–
–
2023 (restated)
Americo Lemos
8,815,591
–
–
–
–
Tim Pullen*
3,091,634
–
–
–
–
* All of Tim Pullen’s outstanding share awards have lapsed because they did not satisfy the performance conditions. He resigned as a
Director on 7 June 2023.
The prior period ‘Unvested and subject to continued performance’ category was disclosed incorrectly in the 2023 annual report and
accounts for Americo Lemos as 5,940,591 shares. The comparative has been restated to present the correct number of shares.
Summary of shareholder voting at the 2024 AGM
Results of the vote on the Remuneration Report at the IQE’s AGM on 25 June 2024 are as below:
Total number of
votes
% of votes cast
For (including discretionary)
508,563,445
97.26
Against
14,353,825
2.74
Total votes cast (excluding withheld votes)
522,917,270
100
Votes withheld
63,178
–
Total votes cast (including withheld votes)
522,980,448
100
Governance Report
IQE Annual Report and Accounts 2024
95
Risk Management and Principal Risks
A description of risk management and the principal
risks facing the business are set out on pages 62 to
67 of the Annual Report.
Relationship with Suppliers and Customers
Our relationships with our customers are explained
throughout the Annual Report, particularly on page
34. Our relationships with our suppliers are specifically
covered on page 35 of the Annual Report.
The Group seeks to agree favourable credit terms
with its suppliers where possible.
Auditor and Disclosure of Information to
the Auditor
The Company’s auditor throughout the period of this
Annual Report was KPMG LLP, who were appointed in
December 2017.
As at the date of the approval of this Annual Report,
as far as each Director is aware, there is no relevant
audit information of which the Company’s auditor is
unaware. Each Director has taken all such steps as he
or she ought to have taken as a Director in order to
make himself/herself aware of any relevant audit
information and to establish that the Company’s
auditor is aware of that information.
Share Capital
The Company’s share capital is made up of one class
of ordinary shares of 1p each which each carry one
vote at general meetings of the Company. Except as
set out in the Articles of Association or in applicable
legislation, there are no restrictions on the transfer of
shares in the Company and there are no restrictions
on the voting rights in the Company’s shares. The full
rights and obligations attaching to the Company’s
ordinary shares, as well as the powers of the
Directors, are set out in the Company’s Articles of
Association, a copy of which is available on the
Company’s website. These can also be obtained from
Companies House or by writing to the General
Counsel and Company Secretary.
The Company is not aware of any agreements
entered into between any shareholders in the
Company which restrict the transfer of shares or the
exercise of any voting rights attached to the shares.
The Company has not acquired any of its own shares
during 2024 (2023: nil).
Financial Instruments
An explanation of the Group policies on the use of
financial instruments and financial risk management
objectives is contained in Note 23 of the financial
statements.
The Directors present their Annual
Report and the Financial Statements
for IQE plc (the “Company”) for the
year ended 31 December 2024.
Principal Activities and Future Development
The Company is the ultimate holding company of a
group of subsidiary undertakings (the “Group”)
engaged in the research, design, development,
manufacture and sale of compound semiconductor
materials. An overview of our principal activities and
an indication of likely future developments in the
Group is given in the Strategic Report.
Strategic Report
The Strategic Report is set out on pages 2 to 69 of the
Annual Report.
Directors & Directors’ Interests
Biographies of all of the Company’s Directors at the
date of this Annual Report, including Non-Executive
Directors, appear on pages 70 to 71 of the Annual
Report. Mark Cubitt joined the Board as a Non-
Executive Director and 'Chair-elect' on 8 October 2024
and became Executive Chair on 29 October 2024.
Jutta Meier, who joined IQE as Chief Financial Officer
and a Director on 22 January 2024, also became
Chief Executive Officer on 29 October 2024.
The beneficial interests of the Directors in the
Company’s share capital is shown on page 95 of the
Remuneration Report.
No Director was beneficially interested in the shares
of any subsidiary company at any time during the
year.
In the year to 31 December 2024, no Director had a
material interest in any contract of significance with
the Company or any of its subsidiaries.
Insurance and Indemnities
The Group maintains insurance to cover its Directors
and officers against their costs in defending
themselves in legal proceedings taken against them
in that capacity and in respect of damages resulting
from the unsuccessful defence of any proceedings. In
addition, to the extent permitted by UK law, the Group
indemnifies its Directors and officers for liabilities
arising from such proceedings. Neither the insurance
nor the indemnity provides cover for situations where
the Director has acted fraudulently or dishonestly.
Directors’ Report
Directors’ Report
96
IQE Annual Report and Accounts 2024
as a going concern and, therefore, that the group
and company may be unable to realise their assets
and discharge their liabilities in the normal course of
business. The financial statements do not include
any adjustments that would result from the basis of
preparation being inappropriate. Details of the going
concern assumption and basis of accounting is set
out in note 2.2 to the financial statements.
Dividends
The Directors do not recommend the payment
of a dividend (2023: £nil).
Research and Development
The Group continues to devote significant resources
to the research and development and the updating
and expansion of its range of products in order to
remain at the forefront of its world markets. Further
information on the expenditure on research and
development is contained in Note 6 of the Financial
Statements. The amount of research and
development expenditure capitalised, and the
amount amortised, in the year, are given in Note 6 of
the Financial Statements.
Employment Policies
A review of the Group’s employment policies is
provided on pages 40 to 42 of the
Annual Report.
Political Donations
The Group has a policy of not making political
donations and no political donations were made
during the year (2023: nil).
Climate Change, Greenhouse Gas and
Energy Emissions
The Group recognises Climate Change is a key
challenge for the world and is working to minimise its
environmental impact through a rigorous
environmental management system, in order to
minimise greenhouse gas (GHG) and energy
emissions. We recognise that as a technology leader,
IQE is in a unique position to be able to improve
energy efficiency through our products.
Our approach to environmental protection is
underpinned by our Environmental Policy and
Environmental Management System, which ensures
all our sites operate in compliance with ISO 14001
requirements. We target minimisation of GHG and
energy emissions, as well as focusing on waste, water
and recycling initiatives.
Details of our GHG and energy emissions figures, as
well as the measures we are undertaking to promote
energy efficiency, including incorporating energy-
saving features into facility design, can be found on
pages 48 to 49.
Details of our approach to climate-related risks and
opportunities can be found on page 50.
Mark Cubitt
Executive Chair, IQE plc
12 May 2025
Substantial shareholdings
As at 30 April 2025, the following are beneficial
interests of 3% or more (where the holding is direct) or
of 5% or more (where the holding is indirect) which
have been notified to the Directors of the Company.
Shareholder
Shares
Issued Capital
%
Lombard Odier
Investment Managers
143,680,429
14.79
Canaccord Genuity
Wealth Management
92,591,748
9.53
T Rowe Price
Global Investments
77,842,802
8.02
Artisan Partners
74,179,949
7.64
Hargreaves Lansdown
71,476,572
7.36
Mr Richard Griffiths
60,891,441
6.27
Interactive Investor
59,085,719
6.08
Dr Andrew W Nelson
38,835,514
4.00
M&G Investments
38,159,663
3.93
*
Source: Equiniti Investor Analytics
Going Concern
In the twelve months to 31 December 2024, reported
revenue has remained subdued at £118,034,000, the
Group made a loss after tax for the year of £38,178,000
and adjusted net debt increased to £18,800,000.
In assessing the going concern basis of preparation,
the Directors have considered the period to
30 September 2026 (‘the going concern assessment
period’) to align with the expiry of the extended RCF
and extended term date of the CLN. The Directors have
prepared financial projections containing both a ‘base
case’ and a ‘severe but plausible downside case’.
In both the base and severe but plausible downside
case, the Group is forecast to maintain liquidity
headroom and to comply with its minimum EBITDA
and minimum liquidity covenants up to the date of
expiry of the RCF on 1 September 2026 or redemption
of the CLN on 13 September 2026.
The Directors, as part of the announced Strategic
Review, plan to raise cash from the divestment of
Group assets to ensure that the Group has a strong
capital position to further invest in its core operations
and to enable the Group to refinance or repay its loan
facilities. In the first instance, this plan includes
divestment options for an IPO or full sale of the Group’s
Taiwan operations and a comprehensive Strategic
Review of all other Group assets and operations.
Whilst the Directors are confident that the divestment
of IQE Taiwan is progressing as planned and will
realise sufficient cash, they acknowledge that a
delayed outcome of the potential sale or IPO of the
non-core asset could impact the availability of
sufficient funding for the Group’s needs beyond the
maturity of its existing facilities.
The Directors have concluded that the successful
completion of the planned sale of non-core assets
and/or availability of sufficient, appropriate funding
for the group’s needs beyond the maturity of existing
facilities represents a material uncertainty related to
events or conditions that may cast significant doubt
on the Group’s and the company’s ability to continue
Governance Report
IQE Annual Report and Accounts 2024
97
statements that are free from material misstatement,
whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group
and to prevent and detect fraud and other
irregularities.
The Directors have decided to prepare voluntarily a
Directors’ Remuneration Report in accordance with
Schedule 8 to The Large and Medium-sized
Companies and Groups (Accounts and Reports)
Regulations 2008 made under the Companies Act
2006, as if those requirements applied to the
Company. The Directors have also decided to
prepare voluntarily a Corporate Governance
Statement as if the Company were required to
comply with the Listing Rules and the Disclosure
Guidance and Transparency Rules of the Financial
Conduct Authority in relation to those matters.
Under applicable law and regulations, the Directors
are also responsible for preparing a Strategic Report
and a Directors’ Report that complies with that law
and those regulations.
The Directors are responsible for the maintenance
and integrity of the corporate and financial
information included on the Company’s website.
Legislation in the UK governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
We consider the Annual Report and financial
statements, taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the Group’s
position and performance, business model and
strategy.
Approved by the Board and signed on its behalf by:
Mark Cubitt
Executive Chair, IQE plc.
12 May 2025
The Directors are responsible for preparing the
Annual Report and the Group and parent Company
financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare
Group and parent Company financial statements for
each financial year. Under the AIM Rules of the
London Stock Exchange, they are required to prepare
the Group’s financial statements in accordance with
UK adopted international accounting standards and
applicable law and they have elected to prepare the
parent Company financial statements on the same
basis.
Under company law, the Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of
the Group and parent Company and of the Group’s
profit or loss for that period. In preparing each of the
Group and parent Company financial statements, the
Directors are required to:
• Select suitable accounting policies and then apply
them consistently;
• Make judgements and estimates that are
reasonable, relevant and reliable;
• State whether they have been prepared in
accordance with UK adopted international
accounting standards;
• Assess the Group and parent Company’s ability to
continue as a going concern, disclosing, as
applicable, matters related to going concern; and
• Use the going concern basis of accounting unless
they intend either to liquidate the Group or the
parent Company or to cease operations, or have
no realistic alternative but to do so.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the parent Company’s transactions and
disclose with reasonable accuracy at any time the
financial position of the parent Company and enable
them to ensure that its financial statements comply
with the Companies Act 2006. They are responsible
for such internal control as they determine is
necessary to enable the preparation of financial
Statement of Directors’
responsibilities in
respect of the Annual
Report and the Financial
Statements
Statement of Directors’ responsibilities
98
IQE Annual Report and Accounts 2024
Non-Financial and Sustainability Information Statement
Non-Financial and
Sustainability
Information Statement
The table below outlines how we meet the non-financial and reporting requirements set out in the Companies
Act 2006. Our business model is set out on pages 12 and 13. Our vision and mission statements are described
on page 1, and on pages 37 to 49 we set out how we act as a responsible business.
Requirement
Information necessary to understand our business
Key policies
Environmental Matters
Our Group policies that support environmental
matters help keep our people and
communities safe.
Sustainability - see pages 48.
Task Force on Climate-related Financial
Disclosures - see pages 50 to 60.
Environmental Policy
Code of Conduct
Colleagues
IQE promotes a safe working culture where all
of our colleagues, whichever their diverse
background, feel welcomed and belong. Our
HR and ethics policies help to support this
ambition.
Code of Conduct
Health and Safety Policies
Dignity at Work Policy
Paternity Leave Policy
Whistleblowing Policy
Flexible Working Policy
Hybrid Working Policy
Social Matters
Our Code of Conduct helps our people to do
the right thing and is a framework for
responsible business practices.
Ethical standards - page 39.
Community engagement - page 43.
Health and Safety - pages 46 to 47.
Environmental performance - page 48 to 49.
Code of Conduct
Environment Policy
Health and Safety Policies
Human Rights
We consider our value chain when
considering human rights, including our own
operations, suppliers and customers.
Suppliers - page 38.
Anti-Slavery Statement - page 39.
Whistleblowing and Speak-Up Statement -
page 39.
Code of Conduct
Anti-Slavery Statement
Data Protection Policy
Whistleblowing Policy
Anti-corruption and
anti-bribery
Our Group global policies support compliance
with international laws relating to anti-bribery
and corruption.
Ethical standards - page 39.
Code of Conduct
Anti-Bribery and Corruption
Policy
Gifts and Hospitality Policy
Climate-related
financial disclosures
We are committed to reducing the impact of
our operations on the environment.
TCFD Report - pages 50 to 60.
Environment Policy
Governance Report
IQE Annual Report and Accounts 2024
99
1. Our opinion is unmodified
We have audited the financial statements of IQE
plc (“the Company”) for the year ended 31
December 2024 which comprise the
consolidated income statement, consolidated
statement of comprehensive income,
consolidated balance sheet, consolidated
statement of changes in equity, consolidated
cash flow statement, parent company balance
sheet, parent company statement of changes in
equity, parent company cash flow statement and
the related notes, including the accounting
policies in note 2.
In our opinion:
— the financial statements give a true and fair
view of the state of the Group’s and of the
parent Company’s affairs as at 31 December
2024 and of the Group’s loss for the year
then ended;
— the Group financial statements have been
properly prepared in accordance with UK-
adopted international accounting standards;
— the parent Company financial statements
have been properly prepared in accordance
with UK-adopted international accounting
standards and as applied in accordance with
the provisions of the Companies Act 2006;
and
— the financial statements have been prepared
in accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (“ISAs
(UK)”) and applicable law. Our responsibilities
are described below. We have fulfilled our
ethical responsibilities under, and are
independent of the Group in accordance with,
UK ethical requirements including the FRC
Ethical Standard as applied to listed entities. We
believe that the audit evidence we have
obtained is a sufficient and appropriate basis for
our opinion.
Independent
auditor’s report
to the members of IQE plc
Overview
Materiality:
group financial
statements as a
whole
£0.96m (2023:£0.90m)
0.81% (2023: 0.8%) of
revenue
Coverage
93% of group revenue
Key audit matters
vs 2023
Recurring risks
Going concern
▲
Carrying amount of
Wireless and
Photonics cash
generating units
▲
Revenue recognition
▲
Parent
Company Only
Recoverability of
parent company’s
investments in
subsidiaries
◄►
100
IQE Annual Report and Accounts 2024
2. Material uncertainty related to going concern
The risk
Our response
Going concern
Risk vs 2023: ▲
Refer to pages 78 and 79
(Audit committee report)
We draw attention to note
2.2 to the financial
statements which indicates
that there is uncertainty
over the successful
completion of the planned
sale of non-core assets
and / or availability of
sufficient, appropriate
funding for the group’s
needs beyond the maturity
of existing facilities. These
events and conditions,
along with the other
matters explained in note
2.2, constitute a material
uncertainty that may cast
significant doubt on the
group’s and the parent
company’s ability to
continue as a going
concern.
Our opinion is not
modified in respect of this
matter.
Disclosure quality
The financial statements explain how
the Board has formed a judgement
that it is appropriate to adopt the
going concern basis of preparation for
the Group and parent company.
That judgement is based on an
evaluation of the inherent risks to the
Group’s and Company’s business
model and how those risks might
affect the Group’s and Company’s
financial resources or ability to
continue operations until at least 30
September 2026.
There is little judgement involved in
the directors’ conclusion that risks and
circumstances described in note 2.2
to the financial statements represent a
material uncertainty over the ability of
the group and company to continue as
a going concern until at least 30
September 2026.
However, clear and full disclosure of
the facts and the directors’ rationale
for the use of the going concern basis
of preparation, including that there is
a related material uncertainty, is a key
financial statement disclosure and so
was the focus of our audit in this area.
Auditing standards require that to be
reported as a key audit matter.
Our procedures included:
— Assessing transparency: We considered
whether the going concern disclosures in note
2.2 to the financial statements give a full and
accurate description of the directors’
assessment of going concern, including the
identified risks, dependencies and related
sensitivities.
Our assessment of management’s going concern
assessment also included:
— Funding assessment: We reviewed the lender
agreements, including the Revolving Credit
facility (RCF) and the Convertible Loan Note
(CLN) to understand the terms including
covenant requirements, maturity and any
restrictions in the use of funds. We inspected
confirmation of the waiver of the December
2024 covenant requirements by the Group’s
lenders in that month.
— Test of detail: We used our modelling
specialists to assess the integrity of the
financial model used by the Board to assess
the base case projections and the various
scenarios, including the severe but plausible
downside forecasts.
— Historical comparisons: We considered
forecasting accuracy when preparing forecast
data by performing retrospective review of
historical forecasts to actuals.
— Benchmarking assumptions: We benchmarked
the key assumptions behind the cashflow
forecasts to customer forecasts where
available. We also benchmarked to wider
market commentary and market research
reports.
— Sensitivity analysis: We assessed the
downside sensitivities to ensure that these
were consistent with our knowledge of the
business, the associated risk exposure and we
considered the most recent trading results to
form a holistic view of the Group. We
considered sensitivities over the level of
available financial resources indicated by the
Group’s financial forecasts taking account of
plausible, but not unrealistic, adverse effects
which could arise from these risks, both
individually and collectively.
— Evaluating Director’s intent: We evaluated the
achievability of the mitigating actions the
Directors consider they would take to improve
the Group’s financial position, should further
risks materialise, which include delays on
discretionary expenditure and delays to certain
software upgrade expenditure, taking into
account the extent to which the Directors are
able to control the timing and outcome.
Governance Report
IQE Annual Report and Accounts 2024
101
The risk
Our response
Carrying amount of Wireless and
Photonics cash generating units
(Wireless - £88.3 million; 2023:
£89.1 million
Photonics - £121.2 million; 2023:
£131.9 million
Wireless Impairment - £3.1m;
2023:nil)
Risk vs 2023: ▲
Refer to page 79 (Audit
committee report), note 2.5 and
2.8 (accounting policy), note 3.1
(accounting estimate) and note
13 (financial disclosures)
Forecast based assessment
The carrying amount of the Wireless
and Photonics cash generating units
are at an increased risk of
irrecoverability due to the impact of
current market conditions on the
timing and level of cashflows.
The estimated recoverable amount is
subjective due to the inherent
uncertainty involved in forecasting
future revenue growth and applying
an appropriate discount factor.
The current market capitalisation is
below total net assets. This is
therefore a potential impairment
indicator which also increases the
associated risk.
The effect of these matters is that
there is a high degree of uncertainty
and involvement of subjective key
assumptions, with a potential range
of reasonable outcomes greater than
our materiality for the financial
statements as a whole, and possibly
many times that amount.
We also identified a fraud risk related
to the estimation of the recoverable
amount of the Wireless and Photonics
cash generating units in response to
possible pressures on the Group
arising from the announced strategic
review.
The financial statements (note 13)
disclose the sensitivities estimated by
the Group.
Our procedures included:
— Benchmarking assumptions: Comparing
the Group’s assumptions, in particular
those relating to forecast revenue growth
to externally derived data, such as
independent market reports and
customer communications where
available.
— Valuation expertise: We derived a
reasonable range of appropriate discount
rates independently, with the support of
our valuation specialist and compared
these with those calculated by the Group.
— Historical comparisons: We considered
forecasting accuracy when preparing
forecast data by performing retrospective
review of historical forecasts to actuals
for revenue growth.
— Sensitivity analysis: We performed
reasonably foreseeable scenario analysis
on the discount rate and growth
assumptions included in the forecast.
— Personnel interviews: We held
discussions with the Group’s Chief
Technology officer and the Group Chief
Revenue Officer to corroborate our
understanding of future uses for
technologies and routes to market.
— Comparing valuations: Comparing the
sum of the discounted cash flows to the
Group’s market capitalisation to assess
the reasonableness of those cashflows
and
— Assessing transparency: Assessing
whether the Group’s disclosures about
the sensitivity of the outcome of
impairment assessment to changes in key
assumptions reflected the risks inherent
in the recoverable amount of the Wireless
and Photonics cash generating units.
We performed the tests above rather than
seeking to rely on any of the Group’s
controls because the nature of the balance is
such that we would expect to obtain audit
evidence primarily through the detailed
procedures described.
3. Other key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Going
concern is a significant key audit matter and is described in section 2 of our report. In arriving at our audit opinion above, the
other key audit matters, in decreasing order of audit significance, were as follows (unchanged from 2023):
102
IQE Annual Report and Accounts 2024
3. Other key audit matters: our assessment of risks of material misstatement
(continued)
Revenue recognition
(£118.0 million; 2023: £115.3
million)
Risk vs 2023: ▲
Refer to page 79 (Audit
committee report) note 2.22
(accounting policy) and note 4.3
(financial disclosures).
Fraud risk related to revenue
recognised in the incorrect period
Due to the Group’s continued
subdued performance there are
pressures on achieving internal and
external expectations of results
because of the announcement of the
Strategic review, in particular
Revenue and Adjusted EBITDA
targets, therefore there may be an
incentive to accelerate or delay the
recognition of revenue in the cut-off
period.
Our procedures included:
— Test of detail: We agreed a sample of
sales transactions arising around the year
end based on their financial significance,
to purchase order and external delivery
confirmation, to assess whether the
performance obligation has been met and
that revenue has not been over- or
understated in the year.
— Test of detail: We agreed a sample of
post year end credit notes, based on their
financial significance, to sales order and
external delivery confirmation, to assess
that revenue has not been overstated to
date.
— Test of detail: We agreed a sample of
inventory quantities used in the year end
revenue recognition adjustment to
inventory and purchase order.
We performed the tests above rather than
seeking to rely on any of the Group’s
controls because the nature of the balance is
such that we would expect to obtain audit
evidence primarily through the detailed
procedures described.
Parent company: Recoverability
of parent company’s
investments in subsidiaries
(Investments: £80.6 million;
2023: £60.2 million)
Reversal of impairment: £18.6m
(2023: nil)
Risk vs 2023: ◄►
Refer to note 2.29 (accounting
policy) and note 16 (financial
disclosures).
Low risk, high value
The carrying amount of the parent
company’s investments in
subsidiaries represents 39% (2023:
26%) of the company’s total assets.
The recoverable amount of the
investments is subjective due to the
inherent uncertainty involved in
forecasting and discounting future
cashflows however, this is not
considered to be at a high risk of
significant misstatement. Due to their
size in the context of the parent
company financial statements, this is
considered to be the area which has
the greatest impact on the parent
company audit.
Our procedures included:
— Test of detail: We compared the carrying
amount of 100% of investments to the net
assets of the relevant subsidiary included
within the group consolidation to identify
whether the net asset value, being an
approximation of the minimum
recoverable amount, was in excess of
their carrying amount and assessed
whether those subsidiaries have
historically been profit-making.
— Assessing subsidiary audit: We assessed
the work performed by the subsidiary
audit teams on all of those subsidiaries
and considered the results of that work
on those subsidiaries’ profits and net
assets.
— Comparing valuations: For the
investments where the carrying amount
exceeded the net asset value, we
compared their carrying amount with the
expected value of the business based on
the subsidiaries’ forecast profitability and
cashflows.
We performed the tests above rather than
seeking to rely on any of the Group’s
controls because the nature of the balance is
such that we would expect to obtain audit
evidence primarily through the detailed
procedures described.
Governance Report
IQE Annual Report and Accounts 2024
103
Group total assets
99
1
99%
4. Our application of materiality and an overview of the scope of
our audit
Materiality for the Group financial statements as a whole was set
at £0.96m (2023: £0.90 million), determined with reference to a
benchmark of Group revenue of which it represents 0.81% (2023:
0.80%). We consider total Group revenue to be the most
appropriate benchmark as it provides a more stable measure
year on year than Group loss before tax because of significant
fluctuations in recent years.
Materiality for the parent Company financial statements as a
whole was set at £0.95m (2023: £0.93 million), determined with
reference to a benchmark of Company total assets, of which it
represents 0.45% (2023: 0.39%).
In line with our audit methodology, our procedures on
individual account balances and disclosures were performed to
a lower threshold, performance materiality, so as to reduce to
an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a
material amount across the financial statements as a whole.
Performance materiality was set at 65% (2023: 65%) of
materiality for the financial statements as a whole, which
equates to £624,000 (2023: £611,000) for the Group and
£617,000 (2023: £604,000) for the parent company. We applied
this percentage in our determination of performance
materiality based on the level of identified misstatements and
control deficiencies identified in the prior year.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £43,200 (2023:
£47,000), in addition to other identified misstatements that
warranted reporting on qualitative grounds.
Overview of the scope of our audit
This year, we applied the revised group auditing standard in
our audit of the consolidated financial statements. The revised
standard changes how an auditor approaches the identification
of components, and how the audit procedures are planned and
executed across components.
In particular, the definition of a component has changed,
shifting the focus from how the entity prepares financial
information to how we, as the group auditor, plan to perform
audit procedures to address group risks of material
misstatement ("RMMs"). Similarly, the group auditor has an
increased role in designing the audit procedures as well as
making decisions on where these procedures are performed
(centrally and/or at component level) and how these
procedures are executed and supervised. As a result, we assess
scoping and coverage in a different way and comparisons to
prior period coverage figures are not meaningful. In this report
we provide an indication of scope coverage on the new basis.
We performed risk assessment procedures to determine which
of the Group’s components are likely to include risks of
material misstatement to the Group financial statements and
which procedures to perform at these components to address
those risks.
In total, we identified 18 components, having considered our
evaluation of the Group’s operational structure and our ability
to perform audit procedures centrally.
Of those, we identified 5 quantitatively significant components
which contained the largest percentages of either total revenue
or total assets of the Group, for which we performed audit
procedures.
We also identified 1 component as requiring special audit
consideration, owing to risks related to revenue and related
accounts, costs and inventory.
Additionally, having considered qualitative and quantitative
factors, we selected 3 components with accounts and/or
disclosures contributing to the specific RMMs of the Group
financial statements.
Group Revenue
£118.0m (2023: £115.3m)
Group materiality
£0.96m (2023: £0.90m)
Revenues
Group materiality
£960,000
Whole financial
statements materiality (2023:
£900,000)
£624,000
Whole financial
statements performance
materiality (2023: £611,000)
£696,000
Range of materiality at 7
components (£264,000 to
£696,000)
(2023: £376,000 to £752,000)
£43,200
Misstatements reported to the
audit committee (2023:
£47,000)
Group revenue
93
7
93%
Our audit procedures covered the following percentage of Group revenue.
We performed audit procedures in relation to
components that accounted for the following
percentages.
Group loss before tax
78
22
78%
104
IQE Annual Report and Accounts 2024
4. Our application of materiality and an overview of the scope of
our audit (continued)
Accordingly, we performed audit procedures on 9 components,
of which we involved component auditors in performing the
audit work on one component. We also performed the audit of
the parent Company.
The Group auditor set the component materialities which
ranged from £264,000 to £696,000 (2023: £376,000 to £752,000)
having regard for the mix of size and risk profile of the Group
across the components.
Our audit procedures covered 93% of Group revenue and we
performed audit procedures in relation to components that
accounted for 78% of Group loss before tax and 99% of Group
total assets .
For the remaining components for which we performed no
audit procedures, no component represented more than 5% of
Group total revenue, Group profit before tax or Group total
assets. We performed analysis at an aggregated Group level to
re-examine our assessment that there is not a reasonable
possibility of a material misstatement in these components.
The Group auditor issued audit instructions to component
auditors on the scope of their work, including minimum
procedures to perform in their audit of revenue.
As part of establishing the overall Group audit strategy and
plan, we conducted the risk assessment and planning
discussion meeting with the component auditor to discuss
Group audit risks relevant to the component, including the key
audit matter in respect of revenue recognition.
We visited one component auditor in Taiwan to assess the
audit risk and strategy. Video and telephone conference
meetings were also held with the component auditor. At these
visits and meetings, the results of planning procedures and
further audit procedures communicated to us were discussed
in more detail, and any further work required by us was then
performed by the component auditor.
We inspected the work performed by the component auditor
for the purpose of the Group audit and evaluated the
appropriateness of conclusions drawn from the audit evidence
obtained and consistencies between communicated findings
and work performed, with a particular focus on work related to
revenue recognition and journal entries.
Impact of controls on our audit
The Group has three main IT systems relevant to our group
audit, being:
•
ERP system used by one out-of-scope component;
•
ERP system used by all remaining in-scope components;
and
•
Inventory management system used for managing itemised
inventory with quantities and recording movements.
We obtained an understanding of these IT systems in the
current period and identified that the Group do not rely on
automated controls in their financial reporting process. Our
knowledge of the general control environment obtained in the
current year and previous audits indicated that we would be
unlikely to obtain the required evidence to support reliance on
IT controls. In addition, whilst the majority of components use
the same ERP system, a number of versions of that ERP system
is used within the Group and therefore there are multiple
instances of similar controls. As a result, we did not plan to
rely on the Group’s general IT controls in our audit and instead
planned additional substantive testing.
Manual control deficiencies, including in relation to journals,
were identified across the Group which, following incremental
risk assessment, didn’t lead to significant changes to our
planned audit approach or to identification of additional fraud
risks, but resulted in a primarily substantive audit approach
being undertaken in all areas of the audit.
We adopted a data-oriented approach to testing journals across
all components and in one component used data and analytical
routines to test revenue. Given that we did not rely on IT controls,
a manual testing approach was performed over the completeness
and accuracy of data used in these routines and in respect of
system data used in our substantive testing on other
transactional areas.
5. Going concern basis of preparation
The directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Group or the
Company or to cease their operations, and as they have
concluded that the Group’s and the Company’s financial position
means that this is realistic for the period to 30 September 2026
(“the going concern period”). As stated in section 2 of our report,
they have also concluded that there is a material uncertainty
related to going concern.
An explanation of how we evaluated management’s assessment
of going concern is set out in section 2 of our report. Our
conclusions based on this work:
• we consider that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is
appropriate;
• we have nothing material to add or draw attention to in relation
to the directors’ statement on pages 117 to 118 to the financial
statements on the use of the going concern basis of accounting,
and their identification therein of a material uncertainty over the
Group and Company’s ability to continue to use that basis for the
going concern period.
6. Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement
due to fraud
To identify risks of material misstatement due to fraud (“fraud
risks”) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity
to commit fraud. Our risk assessment procedures included:
— Enquiring of directors, the Audit Committee and the
Company Secretary and inspection of policy documentation as
to the Group’s high-level policies and procedures to prevent
and detect fraud, including the Group’s channel for
“whistleblowing”, as well as whether they have knowledge of
any actual, suspected or alleged fraud.
— Reading Board, Audit Committee and Remuneration
Committee meeting minutes.
— Considering remuneration incentive schemes and
performance targets for directors and management including
bonus targets and Long Term Incentive Plan EPS growth targets
for director and management remuneration.
— Consultation with our own forensic professionals regarding
the identified fraud risks and the design of the audit procedures
planned in response to these.
We communicated identified fraud risks throughout the audit
and remained alert to any indications of fraud throughout the
audit. This included communication from the Group auditor to
the component auditor of relevant fraud risks identified at the
Group level and requesting the component auditor performing
procedures at the component level to report to the Group
auditor any identified fraud risk factors or identified or
suspected instances of fraud.
As required by auditing standards, and taking into account our
overall knowledge of the control environment, possible
pressures to meet profit targets and revisions to market
guidance, we perform procedures to address the risk of
management override of controls and the risk of fraudulent
revenue recognition, in particular the risk that revenue is
overstated or understated through recording revenue in the
wrong period.
We also identified a fraud risk related to the carrying amount of
Wireless and Photonics cash generating units in response to the
Group’s announced strategic review.
Further detail in respect of this risk is set out in the key audit
matter disclosures in section 3 of this report.
Governance Report
IQE Annual Report and Accounts 2024
105
6. Fraud and breaches of laws and regulations – ability
to detect (continued)
Identifying and responding to risks of material
misstatement due to fraud (continued)
In determining the audit procedures we took into
account the results of our evaluation and testing of the
operating effectiveness of some of the Group-wide fraud
risk management controls. We also performed
procedures including:
— Identifying journal entries to test at selected
components based on risk criteria and comparing the
identified entries to supporting documentation. These
included those posted by senior finance management
and those posted to revenue and cash accounts with an
unusual account pairing.
— Assessing whether the judgements made in making
accounting estimates are indicative of a potential bias.
Identifying and responding to risks of material
misstatement due to non-compliance with laws and
regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the
financial statements from our general commercial and
sector experience and through discussion with the
directors and others within management (as required by
auditing standards) and discussed with the directors and
others within management the policies and procedures
regarding compliance with laws and regulations.
We communicated identified laws and regulations
throughout our team and remained alert to any
indications of non-compliance throughout the audit .
This included communication from the Group audit
team to the one component auditor of relevant laws and
regulations identified at the Group level, and a request
for the component auditor to report to the Group audit
team any instances of non-compliance with laws and
regulations that could give rise to a material
misstatement at the Group level.
The potential effect of these laws and regulations on the
financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that
directly affect the financial statements including financial
reporting legislation (including related companies
legislation), distributable profits legislation and taxation
legislation, and we assessed the extent of compliance
with these laws and regulations as part of our
procedures on the related financial statement items.
Secondly, the Group is subject to many other laws and
regulations where the consequences of non-compliance
could have a material effect on amounts or disclosures
in the financial statements, for instance through the
imposition of fines or litigation. We identified the
following areas as those most likely to have such an
effect: health and safety and hazardous material
legislation, environmental legislation, export control
legislation, anti-bribery, employment law and certain
aspects of company legislation, recognising the nature
of the Group’s global manufacturing and development
activities and its legal form. Auditing standards limit the
required audit procedures to identify non-compliance
with these laws and regulations to enquiry of the
directors and other management and inspection of
regulatory and legal correspondence, if any. Therefore if
a breach of operational regulations is not disclosed to us
or evident from relevant correspondence, an audit will
not detect that breach.
Context of the ability of the audit to detect fraud or
breaches of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some
material misstatements in the financial statements, even
though we have properly planned and performed our
audit in accordance with auditing standards. For
example, the further removed non-compliance with laws
and regulations is from the events and transactions
reflected in the financial statements, the less likely the
inherently limited procedures required by auditing
standards would identify it.
In addition, as with any audit, there remained a higher
risk of non-detection of fraud, as fraud may involve
collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls.
Our audit procedures are designed to detect material
misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to
detect non-compliance with all laws and regulations.
7. We have nothing to report on the other information in
the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the
financial statements. Our opinion on the financial
statements does not cover the other information and,
accordingly, we do not express an audit opinion or,
except as explicitly stated below, any form of assurance
conclusion thereon.
Our responsibility is to read the other information and,
in doing so, consider whether, based on our financial
statements audit work, the information therein is
materially misstated or inconsistent with the financial
statements or our audit knowledge. Based solely on that
work we have not identified material misstatements in
the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
— we have not identified material misstatements in the
strategic report and the directors’ report;
— in our opinion the information given in those reports
for the financial year is consistent with the financial
statements; and
— in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Directors’ remuneration report
In addition to our audit of the financial statements, the
directors have engaged us to audit the information in
the Directors’ Remuneration Report that is described as
having been audited, which the directors have decided
to prepare as if the Company were required to comply
with the requirements of Schedule 8 to The Large and
Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008 (SI 2008 No. 410) made under
the Companies Act 2006.
In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006, as if those
requirements applied to the Company.
Disclosures of emerging and principal risks and longer-
term viability
We are required to perform procedures to identify
whether there is a material inconsistency between the
directors’ disclosures in respect of emerging and
principal risks and the viability statement, and the
financial statements and our audit knowledge.
106
IQE Annual Report and Accounts 2024
7. We have nothing to report on the other information in the
Annual Report (continued)
Based on those procedures, other than the material
uncertainty related to going concern referred to above we
have nothing further material to add or draw attention to in
relation to:
— the directors’ confirmation within the Viability Statement
on page 68 that they have carried out a robust assessment
of the emerging and principal risks facing the Group,
including those that would threaten its business model,
future performance, solvency and liquidity;
— The principal risks and uncertainties disclosures describing
these risks and how emerging risks are identified, and
explaining how they are being managed and mitigated; and
— the directors’ explanation in the Viability Statement of how
they have assessed the prospects of the Group, over what
period they have done so and why they considered that
period to be appropriate, and their statement as to whether
they have a reasonable expectation that the Group will be
able to continue in operation and meet its liabilities as they
fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
Our work is limited to assessing these matters in the context
of only the knowledge acquired during our financial
statements audit. As we cannot predict all future events or
conditions and as subsequent events may result in outcomes
that are inconsistent with judgements that were reasonable at
the time they were made, the absence of anything to report on
these statements is not a guarantee as to the Group’s and
Company’s longer-term viability.
Corporate governance disclosures
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
corporate governance disclosures and the financial statements
and our audit knowledge.
Based on those procedures, we have concluded that each of
the following is materially consistent with the financial
statements and our audit knowledge:
— the directors’ statement that they consider that the annual
report and financial statements taken as a whole is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position
and performance, business model and strategy;
— the section of the annual report describing the work of the
Audit Committee, including the significant issues that the
audit committee considered in relation to the financial
statements, and how these issues were addressed; and
— the section of the annual report that describes the review of
the effectiveness of the Group’s risk management and
internal control systems.
In addition to our audit of the financial statements, the
directors have engaged us to review their Corporate
Governance Statement as if the Company were required to
comply with the Listing Rules and the Disclosure Guidance
and Transparency Rules of the Financial Conduct Authority in
relation to those matters. Under the terms of our engagement
we are required to review the part of the Corporate
Governance Statement relating to the Company’s compliance
with the provisions of the UK Corporate Governance Code
specified for our review. We have nothing to report in this
respect.
8. We have nothing to report on the other matters on which we
are required to report by exception
Under the Companies Act 2006, we are required to report to
you if, in our opinion:
— adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
— the parent Company financial statements and the part of the
Directors’ Remuneration Report which we were engaged to
audit are not in agreement with the accounting records and
returns; or
— certain disclosures of directors’ remuneration specified by
law are not made; or
— we have not received all the information and explanations
we require for our audit.
We have nothing to report in these respects
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 98,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and
fair view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing
the Group and parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless
they either intend to liquidate the Group or the parent Company
or to cease operations, or have no realistic alternative but to do
so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue our opinion in an auditor’s report. Reasonable assurance is
a high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the
financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
10. The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006 and the terms of our engagement by the Company. Our
audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to
them in an auditor’s report, and the further matters we are
required to state to them in accordance with the terms agreed
with the Company, and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the
Company’s members, as a body, for our audit work, for this
report, or for the opinions we have formed.
Kate Teal
(Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
66 Queen Square
Bristol
BS1 4BE
12 May 2025
Governance Report
IQE Annual Report and Accounts 2024
107
Five-year financial summary
2024
£’000
2023
£’000
2022
£’000
2021
£’000
2020
£’000
Revenue
118,034
115,252
167,494
154,096
178,016
Adjusted EBITDA (see below)
8,112
4,313
23,365
18,679
30,101
Operating (loss)/profit
• Adjusted*
(18,357)
(20,199)
(3,557)
(6,454)
5,386
• Reported
(32,958)
(25,779)
(72,976)
(19,978)
(5,517)
(Loss)/profit after tax
• Adjusted*
(23,734)
(23,990)
(5,920)
(19,281)
2,702
• Reported
(38,178)
(29,378)
(74,541)
(31,002)
(2,893)
Net cash flow from operations
Adjusted* (note 5)
6,087
15,744
15,652
17,940
36,324
Reported
1,282
10,074
8,873
18,883
35,457
Free cash flow**
Before adjusted* cash flows
(4,948)
(3,128)
4,148
(1,640)
24,929
Reported
(9,753)
(8,798)
(2,631)
(697)
24,062
Adjusted net (debt)/cash***
(18,800)
(2,228)
(15,248)
(5,804)
1,923
Equity shareholders’ funds
134,110
169,785
175,060
234,621
260,435
Basic EPS – adjusted****
(2.46p)
(2.68p)
(0.74p)
(2.41p)
0.29p
Basic EPS – unadjusted
(3.96p)
(3.28p)
(9.27p)
(3.87p)
(0.41p)
Diluted EPS – adjusted****
(2.46p)
(2.68p)
(0.74p)
(2.41p)
0.29p
Diluted EPS – unadjusted
(3.96p)
(3.28p)
(9.27p)
(3.87p)
(0.41p)
*
The adjusted performance measures for 2024 and 2023 are reconciled in note 5. The adjusted performance measures for 2020-2022 are
reconciled in those financial statements.
**
Free cash flow is defined as net cash outflow of £910,000 (2023: £5,409,000) before cash inflows from financing activities of £12,160,000
(2023: £6,631,000) and net interest paid of £3,317,000 (2023: £3,242,000).
*** 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 12).
Adjusted EBITDA has been calculated as follows:
2024
£’000
2023
£’000
2022
£’000
2021
£’000
2020
£’000
Loss after tax
(38,178)
(29,378)
(74,541)
(31,002)
(2,893)
Tax charge / (credit)
1,273
567
(862)
8,811
(1,001)
Interest expense
3,947
3,032
2,427
2,213
2,165
Share-basedpayments
3,174
2,565
332
1,691
265
(Profit)/Loss on disposal of PPEand intangibles
(62)
(152)
(688)
(77)
182
Adjusted items
11,427
3,015
70,403
11,833
6,850
Depreciation of PPE
16,552
13,186
14,529
13,309
12,983
Depreciation of right-of-use asset
3,791
3,790
3,981
3,854
3,681
Amortisation of intangible assets
6,390
7,688
7,784
8,047
7,869
Gain on remeasurement of right-of-use assets
(202)
–
–
–
–
Adjusted EBITDA
8,112
4,313
23,365
18,679
30,101
108
IQE Annual Report and Accounts 2024
Consolidated income statement
for the year ended 31 December 2024
Note
2024
£’000
2023
£’000
Revenue
4
118,034
115,252
Cost of sales
(113,588)
(112,924)
Gross profit
4,446
2,328
Selling, general and administrative expenses
(29,982)
(32,486)
Impairment loss on intangible assets
5
(3,772)
–
Impairment loss on property, plant and equipment
5
(4,615)
–
Impairment loss on right-of-use asset
5
(31)
–
Gain on remeasurement of right-of-use asset
5
202
–
Impairment (loss)/reversal on trade receivables and contract assets
23
(3)
1,808
Gain on acquisition of remaining interest in CSC
32
–
2,419
Profit on disposal of intangible assets and property, plant and equipment
5
797
152
Operating loss
6
(32,958)
(25,779)
Finance costs
8
(3,947)
(3,032)
Adjusted loss before income tax
(22,304)
(23,231)
Adjustments
5
(14,601)
(5,580)
Loss before income tax
(36,905)
(28,811)
Taxation
9
(1,273)
(567)
Loss for the year
(38,178)
(29,378)
Loss attributable to:
Equity shareholders
(38,178)
(29,378)
(38,178)
(29,378)
Loss per share attributable to owners of the parent during the year
Basic loss per share
12
(3.96p)
(3.28p)
Diluted loss per share
12
(3.96p)
(3.28p)
Adjusted basic and diluted loss per share are presented in note 12.
All items included in the loss for the year relate to continuing operations.
The notes on pages 117 to 169 form an integral part of these consolidated financial statements.
Financial Statements
IQE Annual Report and Accounts 2024
109
Consolidated statement of comprehensive income
for the year ended 31 December 2024
2024
£’000
2023
£’000
Loss for the year
(38,178)
(29,378)
Exchange differences on translation of foreign operations*
(826)
(8,088)
Total comprehensive expense for the year
(39,004)
(37,466)
Total comprehensive expense attributable to:
Equity shareholders
(39,004)
(37,466)
(39,004)
(37,466)
* Items that may subsequently be reclassified to profit or loss.
Items in the statement above are disclosed net of tax. The income tax relating to each component of other
comprehensive expense is disclosed in note 9.
The notes on pages 117 to 169 form an integral part of these consolidated financial statements.
110
IQE Annual Report and Accounts 2024
Consolidated balance sheet
as at 31 December 2024
Note
2024
£’000
2023
£’000
Non-current assets
Intangible assets
13
28,950
35,378
Property, plant and equipment
14
113,674
129,553
Right-of-use assets
15
42,210
37,895
Deferred tax assets
10
–
–
Total non-current assets
184,834
202,826
Current assets
Inventories
17
20,009
24,577
Trade and other receivables
18
37,424
38,220
Cash and cash equivalents
4,660
5,617
Assets held for resale
19
120
2,274
Total current assets
62,213
70,688
Total assets
247,047
273,514
Current liabilities
Trade and other payables
20
(34,405)
(42,572)
Current tax liabilities
(428)
(531)
Bank borrowings
21
–
(4,153)
Lease liabilities
21
(5,658)
(5,865)
Provisions for other liabilities and charges
22
(774)
(2,998)
Total current liabilities
(41,265)
(56,119)
Non-current liabilities
Trade and other payables
20
(2,035)
(2,208)
Bank borrowings
21
(23,460)
(3,692)
Lease liabilities
21
(44,872)
(40,435)
Deferred tax liabilities
10
(774)
(604)
Provisions for other liabilities and charges
22
(531)
(671)
Total non-current liabilities
(71,672)
(47,610)
Total liabilities
(112,937)
(103,729)
Net assets
134,110
169,785
Equity attributable to the shareholders of the parent
Share capital
24
9,672
9,615
Share premium
155,972
155,844
Retained earnings
(85,644)
(47,466)
Exchange rate reserve
31,621
32,447
Other reserves
22,489
19,345
Total equity
134,110
169,785
The notes on pages 117 to 169 form an integral part of these consolidated financial statements. The financial
statements on pages 108 to 169 were authorised for issue by the Board of Directors and approved on 12 May 2025
and were signed on its behalf.
Mrs J Meier
Financial Statements
IQE Annual Report and Accounts 2024
111
Consolidated statement of changes in equity
for the year ended 31 December 2024
Share
capital
£’000
Share
premium
£’000
Retained
earnings /
(losses)
£’000
Exchange
Rate reserve
£’000
Other
reserves
£’000
Total
equity
£’000
At 1 January 2024
9,615
155,844
(47,466)
32,447
19,345
169,785
Comprehensive expense
Loss for the year
–
–
(38,178)
–
–
(38,178)
Other comprehensive expense for
the year
–
–
–
(826)
–
(826)
Total comprehensive expense for
the year
–
–
(38,178)
(826)
–
(39,004)
Transactions with owners
Share-based payments
–
–
–
–
3,177
3,177
Tax relating to share options
–
–
–
–
(33)
(33)
Proceeds from shares issued
57
128
–
–
–
185
Total transactions with owners
57
128
–
–
3,144
3,329
At 31 December 2024
9,672
155,972
(85,644)
31,621
22,489
134,110
Share
capital
£’000
Share
premium
£’000
Retained
earnings/
(losses)
£’000
Exchange Rate
reserve
£’000
Other reserves
£’000
Total
equity
£’000
At 1 January 2023
8,048
154,720
(45,246)
40,535
17,003
175,060
Comprehensive expense
Loss for the year
–
–
(29,378)
–
–
(29,378)
Other comprehensive expense for
the year
–
–
–
(8,088)
–
(8,088)
Total comprehensive expense for
the year
–
–
(29,378)
(8,088)
–
(37,466)
Transactions with owners
Share-based payments
–
–
–
–
2,484
2,484
Tax relating to share options
–
–
–
–
(142)
(142)
Proceeds/(charge) from shares
issued
1,567
1,124
(1,342)
–
28,500
29,849
Transfer of merger reserve to retained
earnings (see note 24)
–
–
28,500
–
(28,500)
–
Total transactions with owners
1,567
1,124
27,158
–
2,342
32,191
At 31 December 2023
9,615
155,844
(47,466)
32,447
19,345
169,785
Other reserves relate to share-based payments.
The notes on pages 117 to 169 form an integral part of these consolidated financial statements.
112
IQE Annual Report and Accounts 2024
Consolidated cash flow statement
for the year ended 31 December 2024
Note
2024
£’000
2023
£’000
Cash flows from operating activities
Adjusted cash inflow from operations
6,087
15,744
Cash impact of adjustments
5
(4,805)
(5,670)
Cash generated from operations
27
1,282
10,074
Interest paid
(3,317)
(3,242)
Income tax paid
(841)
(912)
Net cash generated from operating activities
(2,876)
5,920
Cash flows from investing activities
Purchase of property, plant and equipment
(11,359)
(12,158)
Purchase of intangible assets
(1,609)
(3,113)
Capitalised development expenditure
(1,877)
(2,852)
Proceeds from disposal of property, plant and equipment and intangible assets
4,906
553
Acquisition of subsidiary, net of cash received*
(255)
(390)
Adjusted cash used in investing activities
(15,022)
(17,960)
Cash impact of adjustments – proceeds from disposal of property, plant and
equipment
5
4,828
–
Net cash used in investing activities
(10,194)
(17,960)
Cash flows from financing activities
Proceeds from issuance of ordinary shares
185
31,239
Expenses associated with issue of ordinary shares
–
(1,390)
Proceeds from borrowings
28
19,493
9,932
Repayment of borrowings
28
(4,048)
(28,363)
Payment of lease liabilities
28
(3,470)
(4,787)
Net cash generated from financing activities
12,160
6,631
Net decrease in cash and cash equivalents
(910)
(5,409)
Cash and cash equivalents at 1 January
5,617
11,620
Exchange losses on cash and cash equivalents
(47)
(594)
Cash and cash equivalents at 31 December
4,660
5,617
The notes on pages 117 to 169 form an integral part of these consolidated financial statements.
*Acquisition of subsidiary, net of cash received relates to deferred consideration paid in respect of the Group’s
acquisition of Compound Semiconductor Centre Limited in 2023.
Financial Statements
IQE Annual Report and Accounts 2024
113
Parent company balance sheet
for the year ended 31 December 2024
Note
2024
£’000
2023
£’000
Non-current assets
Intangible assets
13
8,741
7,664
Property, plant and equipment
14
5
17
Investments
16
80,608
60,169
Deferred tax assets
10
–
–
Trade and other receivables
18
118,032
165,422
Total non-current assets
207,386
233,272
Current assets
Trade and other receivables
18
1,636
2,217
Cash and cash equivalents
306
–
Total current assets
1,942
2,217
Total assets
209,328
235,489
Current liabilities
Trade and other payables
20
(40,037)
(37,193)
Bank borrowings
21
–
(857)
Provisions for other liabilities and charges
22
(200)
(195)
Total current liabilities
(40,237)
(38,245)
Non-current liabilities
Bank borrowings
21
(23,460)
(3,692)
Provisions for other liabilities and charges
22
(280)
(671)
Total non-current liabilities
(23,740)
(4,363)
Total liabilities
(63,977)
(42,608)
Net assets
145,351
192,881
Shareholders’ equity
Share capital
24
9,672
9,615
Share premium
155,972
155,844
Retained (losses)/earnings
(42,964)
7,928
Other reserves
22,671
19,494
Total equity
145,351
192,881
The Company has elected to take the exemption under Section 408 of the Companies Act 2006 from presenting the
parent company profit and loss account.
The parent company’s (registered number: 03745726) loss for the financial year amounted to £50,892,000
(2023: £11,762,000 loss).
The notes on pages 117 to 169 form an integral part of these consolidated financial statements.
The financial statements on pages 108 to 169 were authorised for issue by the Board of Directors and approved on 12
May 2025 and were signed on its behalf.
Mrs J Meier
114
IQE Annual Report and Accounts 2024
Parent company statement of changes in equity
for the year ended 31 December 2024
Share capital
£’000
Share
premium
£’000
Retained
earnings /
(losses)
£’000
Other
reserves
£’000
Total
Equity
£’000
At 1 January 2024
9,615
155,844
7,928
19,494
192,881
Comprehensive expense
Loss for the year
–
–
(50,892)
–
(50,892)
Total comprehensive expense
–
–
(50,892)
–
(50,892)
Transactions with owners
Share-based payments
–
–
–
3,177
3,177
Proceeds from shares issued
57
128
–
–
185
Total transactions with owners
57
128
–
3,177
3,362
At 31 December 2024
9,672
155,972
(42,964)
22,671
145,351
Share capital
£’000
Share
premium
£’000
Retained
earnings/
(losses)
£’000
Other
reserves
£’000
Total
Equity
£’000
At 1 January 2023
8,048
154,720
(7,468)
17,012
172,312
Comprehensive expense
Loss for the year
–
–
(11,762)
–
(11,762)
Total comprehensive expense
–
–
(11,762)
–
(11,762)
Transactions with owners
Share-based payments
–
–
–
2,484
2,484
Tax relating to share options
–
–
–
(2)
(2)
Proceeds/(charge) from shares issued
1,567
1,124
(1,342)
28,500
29,849
Transfer of merger reserve to retained earnings
(see note 24)
–
–
28,500
(28,500)
–
Total transactions with owners
1,567
1,124
27,158
2,482
32,331
At 31 December 2023
9,615
155,844
7,928
19,494
192,881
Other reserves relate to share-based payments.
The notes on pages 117 to 169 form an integral part of these consolidated financial statements.
Financial Statements
IQE Annual Report and Accounts 2024
115
Parent company cash flow statement
for the year ended 31 December 2024
Note
2024
£’000
2023
£’000
Cash flows from operating activities
Cash outflow from operations
27
(16,455)
(17,453)
Interest received
892
–
Interest paid
(1,371)
(1,025)
Net cash used in operating activities
(16,934)
(18,478)
Purchase of intangible assets
(1,582)
(2,767)
Purchase of property plant and equipment
(1)
(3)
Proceeds from disposal of property, plant and equipment and intangible assets
2
351
Net cash used in investing activities
(1,581)
(2,419)
Cash flows from financing activities
Proceeds from issuance of ordinary shares
185
31,239
Expenses associated with issue of ordinary shares
–
(1,390)
Proceeds from borrowings
19,493
9,932
Repayments of borrowings
–
(22,177)
Net cash generated from financing activities
19,678
17,604
Net increase/(decrease) in cash and cash equivalents
1,163
(3,293)
Cash and cash equivalents at 1 January
(857)
2,436
Cash and cash equivalents at 31 December
306
(857)
The notes on pages 117 to 169 form an integral part of these consolidated financial statements.
116
IQE Annual Report and Accounts 2024
Notes to the financial statements
for the year ended 31 December 2024
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. Material 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 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 Group applies fair
value measurement in its accounting for derivative foreign
currency financial instruments (see note 2.18).
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. The areas involving a higher
degree of judgement or complexity, or areas where
assumptions and estimates are significant to the
consolidated financial statements, are disclosed
in note 3.
2.2 Going concern
The Group has continued to experience weaker
customer demand and lower customer orders than
originally anticipated following the global
semiconductor industry downturn as market recovery
has been slower than expected in key sectors, driven
primarily by the uncertainty in consumer demand in
end markets.
The continuation of weaker customer demand than
anticipated, resulting in sales that have remained
broadly flat year-on-year, has presented a significant
challenge to the business which, as previously
announced, led the Directors to commence a Strategic
Review of the Group and to take immediate actions to
raise the necessary short-term finance to strengthen
the Group’s liquidity position.
The actions taken by the Directors, and previously
announced, include:
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
The formal waiver, obtained pre-year end, from HSBC
Bank plc of the Group’s 31 December 2024 leverage
and interest cover covenant tests applicable to the
Group’s £28,000,000 ($35,000,000) multi-currency
revolving credit facility (‘RCF’)
The successful £18,000,000 convertible loan note
(‘CLN’) fund raise completed on 13 March 2025
to provide the Group with additional short-term
liquidity whilst the Board completes its Strategic
Review. The CLN has an initial term of 12 months, the
Group has an option to extend for a further six
months, bringing the term to 13 September 2026
The successful negotiation of a Deed of Amendment
and Restatement with HSBC Bank plc to the Group’s
£28,000,000 ($35,000,000) RCF on 10 March 2025 that
replaces the leverage and interest cover financial
covenants with minimum EBITDA and minimum
liquidity financial covenants for the remaining tenor of
the facility to 1 May 2026
We are also pleased that as of 12 May 2025, the Group
has received a four-month extension of its RCF to 1
September 2026 from HSBC, a reflection of the
longstanding and supportive relationship with the
lender.
In the twelve months to 31 December 2024, reported
revenue has remained subdued at £118,034,000 and the
Group made a loss after tax for the year of £38,178,000.
The liquidity impact of the loss, combined with capital
and technology development expenditure, property
lease payments and debt service costs has resulted in
an increase in the Group’s adjusted net debt position
(net debt excluding lease liabilities and fair value
gains/losses on derivative instruments) to £18,800,000
(2023: £2,228,000). At 31 December 2024, the Group had
undrawn committed funding of £4,400,000 ($5,500,000)
available under the terms of its multi-currency revolving
credit facility.
In assessing the going concern basis of preparation, the
Directors have considered the period to 30 September
2026 (‘the going concern assessment period’) to align
with the expiry of the extended RCF and extended term
date of the CLN.
The Directors have prepared financial projections
containing both a ‘base case’ and a ‘severe but
plausible downside case’.
Base Case
The base case is derived from Group’s Board-approved
2025 budget, latest H12026 forecast and run rate to 30
September 2026, updated for actual results to 31 March
2025. The base case incorporates a modest expected
improvement in market dynamics and the impact of
cost cutting actions already implemented by the Board.
The base case was prepared with the following
key assumptions:
Revenue for 2025 is forecast to return to modest mid-
single digit percentage year-on-year growth with
sequential mid-single digit percentage half-on-half
growth forecast in H12026
Financial Statements
IQE Annual Report and Accounts 2024
117
Notes to the financial statements continued
for the year ended 31 December 2024
2. Material accounting policies continued
GBP to USD FX rate of 1.32 adopted for the forecast
cash flows throughout the going concern period
Direct wafer product margins for 2025 and H12026
reflect operating efficiency improvements linked to a
combination of restructuring actions that have been
implemented in 2024 and increased capacity
utilisation
Labour inflation in 2025 and H12026 in line with labour
market norms and non-labour cost inflation in 2025 and
H12026 in line with the current inflationary environment
Low double digit £’m of capital expenditure in 2025
which includes investment in committed Gallium
Nitride (GaN) related manufacturing capacity,
enabling diversification into the high-growth power
electronics and advanced display (uLED) markets and
low single digit £’m of capital expenditure in H12026
related to operational sustainability and maintenance
capital expenditure
Severe but plausible downside
The severe but plausible downside case was prepared
by applying the following downsides and mitigating
actions:
Revenue is assumed 7% down on the base case for
2025 and 20% down for H12026 reflecting a broadly flat
year on-year outlook resulting from a combination of
continued weakness in customer demand, further
delays in market recovery and the impact of greater
forecasting uncertainty the further out into the future
In line with the revenue reduction in both years, there
is a reflective reduction in variable operating costs for
2025 and H12026
The application of mitigations in the form of
reductions in certain non-manufacturing related
discretionary expenditure and deferred investment in
technology asset development over and above those
reflected in the base case. These cost savings and
cash management actions have already been
identified, are in the control of management and can
be swiftly implemented
In both the base and severe but plausible downside
case, the Group is forecast to maintain liquidity
headroom and to comply with its minimum EBITDA and
minimum liquidity covenants up to the date of expiry of
the RCF on 1 September 2026 or redemption of the CLN
on 13 September 2026.
The Directors, as part of the announced Strategic
Review, plan to raise cash from the divestment of Group
assets to ensure that the Group has a strong capital
position to further invest in its core operations and to
enable the Group to refinance or repay its loan facilities.
In the first instance, this plan includes divestment
options for an IPO or full sale of the Group’s Taiwan
operations and a comprehensive Strategic Review of all
other Group assets and operations.
Whilst the Directors are confident that the divestment of
IQE Taiwan is progressing as planned and will realise
sufficient cash, they acknowledge that a delayed
outcome of the potential sale or IPO of the non-core
asset could impact the availability of sufficient funding
for the Group’s needs beyond the maturity of its existing
facilities.
The Directors have concluded that the successful
completion of the planned sale of non-core assets
and/or availability of sufficient, appropriate funding for
the group’s needs beyond the maturity of existing
facilities represents a material uncertainty related to
events or conditions that may cast significant doubt on
the group’s and the company’s ability to continue as a
going concern and, therefore, that the group and
company may be unable to realise their assets and
discharge their liabilities in the normal course of
business. The financial statements do not include any
adjustments that would result from the basis of
preparation being inappropriate.
118
IQE Annual Report and Accounts 2024
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 2024:
• Amendment 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. The
amendment also requires disclosure of information
relating to the risks associated with non-current
liabilities that are subject to future covenants that the
liability could become repayable within 12 months.
• Amendment to IAS 7 ‘Statement of Cash Flows’ and
IFRS 7 ‘Financial Instruments: Disclosures’ related to the
disclosure and transparency of supplier finance
arrangements.
• Amendment to IAS 12 ‘Income taxes’ which provides
temporary mandatory relief from deferred tax
accounting for top up tax and disclosure of new
information to compensate for the potential loss of
information arising from the mandatory relief.
• Amendment to IFRS 16 ‘Leases’ which confirms the
initial and subsequent recognition principles for
variable lease payments as a liability in a sale and
leaseback transaction.
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
2025 and have not been applied in preparing these
consolidated financial statements:
• Annual Improvements to IFRS Accounting Standards—
Volume 11 which contains various improvement and
enhancements to existing standards
• IFRS S1 ‘General Requirements for Disclosure of
Sustainability related Financial Information’ and IFRS
S2 ‘Climate related Disclosures’
• IFRS 18 ‘Presentation and disclosure in financial
statements’ which includes new requirements for
presentation and disclosure with a focus on the
income statement
• IFRS 19 ‘Subsidiaries without public accountability:
disclosures’ is a voluntary standard that contains a
reduced disclosure framework for use by eligible
subsidiaries that prepare financial statements
applying IFRS Accounting Standards.
• Amendment to IAS 21 ‘The Effects of Changes in
Foreign Exchange Rates’ which establishes how a spot
exchange rate is estimated when a currency lacks
exchangeability.
• Amendments to the Classification and Measurement
of Financial Instruments (Amendments to IFRS 9 and
IFRS 7) which provides further clarification and
requirements for the recognition and derecognition
criteria for financial assets and liabilities, the
classification requirements for financial assets and
disclosure requirements related to the amendments
to the classification requirements.
• Amendments to contracts referencing nature-
dependent Electricity (Amendments to IFRS 9 and IFRS
7) for power purchase agreements
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.
2.4 Consolidation
The consolidated financial statements comprise the
results of IQE plc (the Company) and its subsidiary
undertakings, together with the Group’s share of the
results of its joint venture.
Subsidiaries
Subsidiaries are all entities over which the Group has
control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect
those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on
which control is transferred to the Group and are de-
consolidated from the date that control ceases.
Inter-company transactions, balances and unrealised
gains or losses on transactions between Group
companies are eliminated and accounting policies of
subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the
Group.
Joint ventures
The Group applies IFRS 11 to all joint arrangements. Under
IFRS 11, investments in joint arrangements are classified
as either joint operations or joint ventures depending on
the contractual rights and obligations of each investor.
The nature of the Group’s joint arrangements has been
assessed, and each joint arrangement has been
determined to be a joint venture. Joint ventures are
accounted for using the equity method.
Under the equity method of accounting, interests in joint
ventures are initially recognised at cost and adjusted
thereafter to recognise the Group’s share of the post-
acquisition profits or losses and movements in other
comprehensive income.
Gains by the Group on transactions with joint ventures
are eliminated against the carrying value of the Group’s
interest in its joint ventures to the extent that the gain
does not exceed the carrying amount. In circumstances
where a gain exceeds the carrying amount the Group
has made an accounting policy choice to recognise the
gain in the comprehensive income statement, subject
to an assessment of recoverability of value from the
joint venture rather than recognising the gain as
deferred income in the consolidated balance sheet.
Financial Statements
IQE Annual Report and Accounts 2024
119
Notes to the financial statements continued
for the year ended 31 December 2024
2. Material accounting policies continued
When the Group’s share of losses in a joint venture
equals or exceeds its interests in the joint ventures
(which includes any long-term interests that, in
substance, form part of the Group’s net investment in
the joint ventures), the Group does not recognise further
losses, unless it has incurred obligations or made
payments on behalf of the joint ventures. Unrealised
gains on transactions between the Group and its joint
ventures are eliminated to the extent of the Group’s
interest in the joint ventures. Unrealised losses are also
eliminated unless the transaction provides evidence of
an impairment of the asset transferred. Accounting
policies of the joint ventures have been changed where
necessary to ensure consistency with the policies
adopted by the Group.
Business combinations
The Group accounts for business combinations using
the acquisition method when control is transferred to
the Group. The consideration transferred in the
acquisition is generally measured at fair value, as are
the identifiable net assets acquired. Any goodwill that
arises is tested annually for impairment. Any gain on a
bargain purchase is recognised in profit or loss
immediately. Transaction costs are expensed as
incurred, except if related to the issue of debt or equity
securities. The consideration transferred does not
include amounts related to the settlement of pre-
existing relationships. Such amounts are generally
recognised in profit or loss.
Where the fair values of acquired identifiable assets,
liabilities and contingent liabilities are initially recognised
on a provisional basis, these are reassessed during the
12-month period following the date of the business
combination. Adjustments to the fair values as at the
date of acquisition that result from new information that
existed at the date of acquisition which, if known at the
time, would have resulted in a different amount being
recognised within this ‘measurement period’, are
recorded with any net impact being added to or
deducted from the goodwill recognised. Such
adjustments are recognised in both the current period
and the restated comparative period balance sheets as
if the final fair values had been used in the initial
recognition of the acquisition. Subsequent to the
measurement period, any adjustments to the recorded
fair value of identifiable assets, liabilities and contingent
liabilities are taken through the income statement as an
exceptional income or expense.
The Group recognises any non-controlling interest on
an acquisition-by-acquisition basis, either at fair value
or at the non-controlling interest’s proportionate share
of the recognised amounts of the acquiree’s identifiable
net assets.
Acquisition related costs are expensed as incurred.
2.5 Intangible assets
a) Goodwill
Goodwill arising on an acquisition is recognised as an
asset and initially measured at cost, being the excess of
the fair value of the consideration over the fair value of
the identifiable assets, liabilities and contingent liabilities
acquired.
Goodwill is not amortised but is reviewed for potential
impairment at least annually, or more frequently if
events or circumstances indicate a potential
impairment. For the purpose of impairment testing,
goodwill is allocated to each of the Cash Generating
Units to which it relates. Any impairment identified is
immediately charged to the Consolidated Income
Statement. Subsequent reversals of impairment losses
for goodwill are not recognised.
Negative goodwill arising on an acquisition where the
fair value of identifiable assets, liabilities and contingent
liabilities exceeds the fair value of the consideration is
credited and recognised in the consolidated income
statement immediately.
b) Patents, trademarks and licences
Separately acquired patents, trademarks and licences
are shown at historical cost. Patents, trademarks and
licences acquired in a business combination are
recognised at fair value at the acquisition date. Patents,
trademarks and licences have a finite useful life and are
carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line
method to allocate the cost of the assets over their
estimated useful lives of 10 to 15 years. Amortisation is
charged to selling and general administration expenses
in the income statement.
The carrying value of patents, trademarks and licences
is reviewed for potential impairment if events or
circumstances indicate a potential impairment. Any
impairment identified is immediately charged to the
Consolidated Income Statement.
c) Development costs
Expenditure incurred that is directly attributable to the
development of new or substantially improved products
or processes is recognised as an intangible asset when
the following criteria are met:
• the product or process is intended for use or sale;
• the development is technically feasible to complete;
• there is an ability to use or sell the product or process;
• it can be demonstrated how the product or process
will generate probable future economic benefits;
• there are adequate technical, financial and other
resources to complete the development; and
• the development expenditure can be reliably
measured.
120
IQE Annual Report and Accounts 2024
Directly attributable costs refer to the materials
consumed; the directly attributable labour; and the
directly attributable overheads incurred in the
development activity. General operating costs,
administration costs and selling costs do not form part
of directly attributable costs.
All research and other development costs are expensed
as incurred.
Capitalised development costs are amortised in line
with the expected production volume profile over the
period during which the economic benefits are
expected to be received, which typically ranges
between 3 and 8 years. The estimated remaining useful
lives of development costs are reviewed at least on an
annual basis. Amortisation commences once the
project is completed, and the development has been
released into production. Amortisation is charged to
selling and general administration expenses in the
income statement.
The carrying value of capitalised development costs in
respect of completed projects is reviewed for
impairment if events or circumstances indicate a
potential impairment. Projects that remain under
development at the reporting date are reviewed for
impairment at least annually, or more frequently if
events or circumstances indicate a potential
impairment. Any impairment identified is immediately
charged to the Consolidated Income Statement.
d) Software
Directly attributable costs incurred in the development
of bespoke software for the Group’s own use are
capitalised and amortised on a straight-line basis over
the expected useful life of the software, which typically
ranges between 3 and 10 years. Amortisation is charged
to selling and general administration expenses in the
income statement.
The carrying value of capitalised software costs is
reviewed for potential impairment if events or
circumstances indicate a potential impairment. Any
impairment identified is immediately charged to the
Consolidated Income Statement. The costs of
maintaining internally developed software and annual
licence fees paid to utilise third-party software are
expensed as incurred.
2.6 Property, plant and equipment
Property, plant and equipment is stated at cost less
accumulated depreciation and any provision for
impairment. Cost comprises all costs that are directly
attributable to bringing the asset into working condition
for its intended use. Depreciation is calculated to write
down the cost of property, plant and equipment to its
residual value on a straight-line basis over the following
estimated useful economic lives:
Freehold buildings
10 to 40 years
Short leasehold improvements
5 to 30 years
Plant and machinery
3 to 25 years
Fixtures and fittings
3 to 10 years
No depreciation is provided on land or assets yet to be
brought into use. Depreciation is charged to cost of
sales and selling and general administration expenses
in the income statement.
Costs incurred after initial recognition are included in
the assets’ carrying amounts, or recognised as a
separate asset as appropriate, only when it is probable
that future economic benefits associated with them will
flow to the Group and the cost of the item can be
measured reliably. The carrying amount of the replaced
part is derecognised. All other repairs and maintenance
are charged to the income statement during the
financial year in which they are incurred.
Gains and losses on disposals are determined by
comparing the proceeds with the carrying amount and
are recognised within ‘profit/loss on disposal of property,
plant and equipment’ in the income statement.
Assets’ residual values and useful economic lives are
reviewed, and adjusted if appropriate, at the end of
each reporting period. The carrying value of property,
plant and equipment is reviewed for potential
impairment if events or circumstances indicate a
potential impairment. Any impairment identified is
immediately charged to the Consolidated Income
Statement.
Financial Statements
IQE Annual Report and Accounts 2024
121
Notes to the financial statements continued
for the year ended 31 December 2024
2. Material accounting policies continued
2.7 Leases
The Group assesses whether a contract is, or contains, a
lease at inception of the contract. A contract is, or
contains, a lease if the contract conveys the right to
control the use of an identified asset for a period of time
in exchange for consideration.
The Group recognises a right-of-use asset and a
corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-
term leases (defined as leases with a lease term of 12
months or less), leases of low-value assets (such as
small items of office furniture and equipment) and
leases with variable rentals not linked to a relevant
index. For these leases, the Group recognises the lease
payments as an operating expense on a straight-line
basis over the term of the lease unless another
systematic basis is more representative of the time
pattern in which economic benefits from the leased
assets are consumed.
Right-of-use assets and lease liabilities are recognised
at the lease commencement date. Right-of-use assets
are initially measured at cost, and subsequently
measured at cost less any accumulated depreciation
and impairment losses, adjusted for certain
remeasurements of the lease liability.
Right-of-use assets are depreciated over the shorter
period of lease term and useful life of the underlying
asset. If a lease transfers ownership of the underlying
asset or the cost of the right-of-use asset reflects that
the Group expects to exercise a purchase option, the
related right-of-use asset is depreciated over the useful
life of the underlying asset. The depreciation starts at the
commencement date of the lease.
The Group applies IAS 36 to determine whether a right-
of-use asset is impaired and accounts for any identified
impairment loss as described in the ‘Property, Plant and
Equipment’ policy.
Right-of-use assets are presented as a separate line in
the consolidated statement of financial position.
The lease liability is initially measured at the present
value of the lease payments that are not paid at the
commencement date, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily
determined, the Group’s incremental borrowing rate.
The lease liability is subsequently measured by
increasing the carrying amount to reflect interest on the
lease liability (using the effective interest method) and
by reducing the carrying amount to reflect the lease
payments made.
The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use
asset) when there is a change in future lease payments.
Changes in future lease payments can arise from a
change in an index or rate, a change in the assessment
of whether a purchase or extension option is reasonably
certain to be exercised or from a change in assessment
about whether a termination option is reasonably
certain not to be exercised.
Variable rents that do not depend on an index or rate
are not included in the measurement of the lease
liability and the right-of-use asset. The related
payments are recognised as an expense in the period in
which the event or condition that triggers those
payments occurs and are included in the line ‘Cost of
sales’ in profit or loss.
2.8 Impairment of non-financial assets
Intangible assets that have an indefinite useful life, or
intangible assets not ready to use, are not subject to
amortisation and are reviewed for potential impairment
at least annually, or more frequently if events or
circumstances indicate a potential impairment. Assets
that are subject to amortisation are reviewed for
impairment whenever events or changes in
circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for
the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value (less
disposal costs) and value in use.
Value in use is based on the present value of the future
cash flows relating to the asset, discounted at the
Group’s risk adjusted pre-tax discount rate. For the
purpose of assessing impairment, assets are grouped
at the lowest levels for which there are separately
identifiable cash flows.
Indicators that impairment losses might have reversed
are assessed annually.
2.9 Inventories
Inventories are stated at the lower of cost and net
realisable value. Cost is determined using the first-in,
first-out method. Cost comprises direct materials and,
where applicable, direct labour costs and attributable
overheads that have been incurred in bringing the
inventories to their present location and condition
based on normal operating capacity. Net realisable
value is the estimated selling price in the ordinary
course of business, less applicable selling expenses.
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2.10 Trade receivables
Trade receivables are amounts due from customers for
goods sold or services performed in the ordinary course
of business. If collection is expected in one year or less
(or in the normal operating cycle of the business if
longer), they are classified as current assets. If not, they
are presented as non-current assets.
Trade receivables are recognised initially at fair value
and subsequently measured at amortised cost using
the effective interest method, less provision for
impairment.
2.11 Cash and cash equivalents
In the consolidated statement of cash flows, cash and
cash equivalents includes cash in hand, deposits held
at call with banks, other short-term highly liquid
investments with original maturities of three months or
less, and bank overdrafts. Bank overdrafts are presented
within cash and cash equivalents where the Group has
a right of set-off under its treasury arrangements that
are pooled by territory.
2.12 Assets held for resale
Assets held for resale are not depreciated, are
measured at the lower of carrying amount and fair
value less costs to sell and are presented separately in
the statement of financial position.
2.13 Financial assets
Financial assets are recognised on the Group’s balance
sheet when the Group becomes a party to the
contractual provisions of the financial instrument and
are derecognised when the rights to receive cash flows
have expired or have been transferred and the Group
has transferred substantially all the risks and rewards
of ownership.
Classification of financial assets
On initial recognition, a financial asset is classified as
measured at amortised cost, fair value through other
comprehensive income – debt investment, fair value
through other comprehensive income – equity
investment or fair value through profit or loss.
The classification depends on the purpose for which the
financial assets were acquired, and the classification is
determined at the date of initial recognition. Financial
assets are not reclassified subsequent to their initial
recognition unless the Group changes its business
model for managing financial assets, in which case all
affected financial assets are reclassified on the first day
of the reporting period following the change in
business model.
A financial asset is measured at amortised cost if it
meets both of the following conditions:
• it is held within a business model whose objective is to
hold assets to collect contractual cash flows;
• its contractual terms give rise to cash flows that are
solely payments of principal and interest on the
principal amount outstanding.
Amortised cost financial assets are non-derivative
financial assets with fixed or determinable payments
that are not quoted in an active market. They are
included in current assets, except for maturities greater
than 12 months after the reporting period where the
item is classified as a non-current asset. The Group’s
financial assets comprise trade and other receivables
(note 2.10), cash and cash equivalents (note 2.11) and
contract assets (note 2.22).
Amortised cost and effective interest method
Financial assets are measured at amortised cost using
the effective interest method. The effective interest rate
is the rate that discounts estimated future cash receipts
excluding expected credit losses, through the expected
life of the debt instrument, or, where appropriate, a
shorter period, to the gross carrying amount of the debt
instrument on initial recognition.
The amortised cost of a financial asset is the amount at
which the financial asset is measured at initial
recognition minus the principal repayments, plus the
cumulative amortisation using the effective interest
method of any difference between that initial amount
and the maturity amount, adjusted for any loss
allowance. The gross carrying amount of a financial
asset is the amortised cost of a financial asset before
adjusting for any loss allowance. Interest income,
foreign exchange gains and losses and impairment are
recognised in profit or loss. Any gain or loss on
derecognition is recognised in profit or loss.
Financial Statements
IQE Annual Report and Accounts 2024
123
Notes to the financial statements continued
for the year ended 31 December 2024
2. Material accounting policies continued
Impairment of financial assets
The Group recognises a loss allowance for expected
credit losses (‘ECL’) on trade receivables and contract
assets that are measured at amortised cost. The
amount of expected credit losses is updated at each
reporting date to reflect changes in credit risk since
initial recognition of the respective financial instrument.
Expected credit losses are measured as an allowance
equal to 12-month ECL for stage 1 assets, or lifetime ECL
for stage 2 or stage 3 assets. An asset moves to stage 2
when its credit risk has increased significantly since
initial recognition. In circumstances where credit risk
increases to the point that it becomes highly probable
that the debt instrument will not become recoverable,
the Group considers that this would represent a default
event and moves to stage 3.
The Group recognises lifetime ECL for trade receivables
and contract assets. The ECL on these financial assets
are estimated based on the Group’s historical credit loss
experience, adjusted for factors that are specific to the
debtors including observable data such as changes in
arrears, or economic conditions that provide an
indication that a debtor is experiencing significant
financial difficulty, default or delinquency in payment
that correlate with defaults.
Lifetime ECL represents the expected credit losses that
will result from all possible default events over the
expected life of a financial instrument. In contrast, 12-
month ECL represents the portion of lifetime ECL that is
expected to result from default events on a financial
instrument that are possible within 12 months after the
reporting date.
Credit impaired financial assets
At each reporting date, the Group assesses whether
financial assets carried at amortised cost are credit-
impaired. A financial asset is ‘credit-impaired’ when one
or more events that have a detrimental impact on the
estimated future cash flows of the financial asset have
occurred. The gross carrying amount of a financial
asset is written off (either partially or in full) to the extent
that there is no realistic prospect of recovery.
Measurement and recognition of expected
credit losses
The measurement of ECL is a function of the probability
of default, loss given default (i.e. the magnitude of the
loss if there is a default) and the exposure at default. The
assessment of the probability of default and loss given
default is based on historical data adjusted by forward-
looking information. Exposure at default is represented
by the gross carrying amount of the financial asset at
the reporting date.
ECL for financial assets is estimated as the difference
between all contractual cash flows that are due to the
Group in accordance with the contract, and all the cash
flows that the Group expects to receive, discounted at
the original effective interest rate.
If the Group has measured the loss allowance for a
financial instrument at an amount equal to lifetime ECL
in the previous reporting period, but determines at the
current reporting date that the conditions for lifetime
ECL are no longer met, the Group measures the loss
allowance at an amount equal to 12-month ECL at the
current reporting date.
The Group recognises an impairment gain or loss in
profit or loss for financial assets with a corresponding
adjustment to the carrying amount in the consolidated
balance sheet.
2.14 Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either
financial liabilities or as equity, in accordance with the
substance of the contractual arrangements and the
definitions of a financial liability and an equity
instrument.
Equity instruments
An equity instrument is any contract that evidences a
residual interest in the assets of the Group after
deducting all of its liabilities. Equity instruments issued by
the Group are recognised as the proceeds received, net
of direct issue costs. Repurchase of the Company’s own
equity instruments is recognised and deducted directly
in equity. No gain or loss is recognised in profit or loss on
the purchase, sale, issue or cancellation of the
Company’s own equity instruments.
Financial liabilities
Financial liabilities are classified as measured at
amortised cost or fair value through profit and loss. A
financial liability is classified as fair value through profit
and loss if it is classified as held-for-trading, it is a
derivative or it is designated as such on initial
recognition. Financial liabilities at fair value through
profit and loss are measured at fair value and net gains
and losses, including any interest expense, are
recognised in profit or loss. Other financial liabilities are
measured at amortised cost using the effective interest
method.
Financial liabilities are non-derivative financial liabilities
with fixed or determinable payments and they are
included in current liabilities, except for maturities
greater than 12 months after the reporting period where
the item is classified as a non-current liability. The
Group’s financial liabilities comprise trade and other
payables (note 2.15), borrowings (note 2.16) and lease
liabilities (note 2.7) in the consolidated balance sheet.
2.15 Trade payables
Trade payables are obligations to pay for goods or
services that have been acquired in the ordinary course
of business from suppliers. Trade payables are classified
as current liabilities if payment is due within one year or
less (or in the normal operating cycle of the business if
longer). If not, they are presented as non-current
liabilities. Trade payables are recognised initially at fair
value and subsequently measured at amortised cost
using the effective interest method.
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2.16 Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently
carried at amortised cost using the effective interest
method.
2.17 Borrowing costs
General and specific borrowing costs directly
attributable to the acquisition, construction or
production of qualifying assets, which are assets that
take a substantial period of time to get ready for their
intended use, are added to the cost of those assets, until
such time as the assets are substantially ready for their
intended use. All other borrowing costs are recognised
in profit or loss in the period in which they are incurred.
2.18 Derivatives and hedging activities
Derivatives are initially recognised at fair value on the
date a derivative contract is entered into, and they are
subsequently remeasured to their fair value at the end
of each reporting period. The accounting for
subsequent changes in fair value depends on whether
the derivative is designated as a hedging instrument
and, if so, the nature of the item being hedged. The
Group designates certain derivatives as either:
• hedges of a particular risk associated with the cash
flows of recognised assets and liabilities and highly
probable forecast transactions (cash flow hedges), or
• hedges of a net investment in a foreign operation (net
investment hedges).
Cash flow hedges and derivatives that qualify for
hedge accounting
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash flow
hedges is recognised in the cash flow hedge reserve
within equity. The gain or loss relating to the ineffective
portion is recognised immediately in profit or loss, within
other gains/(losses).
Cash flow hedges and derivatives that do not
qualify for hedge accounting
Changes in the fair value of any derivative instrument
that does not qualify for hedge accounting are
recognised immediately in profit or loss and are
included in other gains/(losses).
Net investment hedges
Hedges of net investments in foreign operations are
accounted for similarly to cash flow hedges. Any gain or
loss on the hedging instrument relating to the effective
portion of the hedge is recognised in other
comprehensive income and accumulated in reserves in
equity. The gain or loss relating to the ineffective portion
is recognised immediately in profit or loss within other
gains/(losses). Gains and losses accumulated in equity
are reclassified to profit or loss when the foreign
operation is partially disposed of or sold.
2.19 Government grants
Government grants are recognised at fair value when
there is reasonable assurance that the Group has
complied with the conditions attaching to them and the
grants will be received. Grants related to purchase of
assets are treated as deferred income and allocated to
the income statement over the useful lives of the related
assets, while grants related to expenses are treated as
other income in the income statement.
2.20 Share capital and other reserves
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of new ordinary
shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
Other reserves relate to share-based payment
transactions.
2.21 Provisions
Provisions are recognised when the Group has a
present legal or constructive obligation as a result of a
past event, it is probable that an outflow of resources
will be required to settle the obligation, and the amount
has been reliably estimated.
• Restructuring provisions comprise site closure costs
and employee termination payments. Provisions are
not recognised for future operating losses.
• Warranty provisions comprise the replacement cost
of wafers expected to be returned under warranty
• Dilapidation provisions comprise costs to fulfil
property lease obligations at expiry of the relevant
property lease
• Onerous contract provisions comprise contractual
obligations related to future payments where the
Group expects to receive no economic benefit.
Provisions are measured at the present value of the
expenditures expected to be required to settle the
obligation using a pre-tax rate that reflects the time
value of money and the risks specific to the obligation.
2.22 Revenue recognition
Revenue represents the transaction price specified in a
contract with a customer for goods, services and
intellectual property licences provided in the ordinary
course of business net of value added and other sales
related taxes.
Standard Customer Products
Revenue is recognised when the goods are delivered
and have been accepted by customers. For contracts
that permit the customer to return an item, revenue is
recognised to the extent that it is highly probable that a
significant reversal in the amount of revenue
recognised will not occur.
The amount of revenue recognised is adjusted for
expected returns, which are estimated based on
historical data for each specific type of product, with a
refund liability recognised as part of provisions. The
Group reviews its estimate of expected returns at each
reporting date and updates the amounts of any liability
accordingly.
Financial Statements
IQE Annual Report and Accounts 2024
125
Notes to the financial statements continued
for the year ended 31 December 2024
2. Material accounting policies continued
A receivable is recognised when the goods are
delivered, since this is the point in time that the
consideration is unconditional, performance obligations
have been satisfied and only the passage of time is
required before the payment is due.
Bespoke Customer Products
Revenue is recognised for bespoke customer products
with no alternative use where the Group has a
guaranteed contractual right to payment on an over
time basis prior to the delivery of goods to the
customers’ premises. Revenue is recognised on an input
basis by reference to the stage of completion of the
manufacturing process, a process which includes an
epitaxial wafer manufacture stage and a metrology
and wafer test stage which are both typically
completed within a limited number of days.
The amount of revenue recognised is adjusted for
expected returns, which are estimated based on
historical data for each specific type of product with a
refund liability recognised as part of provisions. The
Group reviews its estimate of expected returns at each
reporting date and updates the amounts of any liability
accordingly.
The Group operates supplier managed inventory
arrangements for certain global customers where the
Group is responsible for ensuring that contractually
agreed levels of inventory are maintained at specified
locations. The Group has a guaranteed contractual
right to payment for the bespoke customer products
manufactured under these arrangements with revenue
recognised on an over time basis.
Assets and liabilities arising from contracts with
customers are separately identified. Contract assets
relate to consideration recognised for work completed
but not billed at the balance sheet date. Contract
liabilities relate to obligations to transfer goods or
services to a customer for which the entity has received
consideration (or the amount is due) from the
customer.
Reactor Rental
Reactor rental revenue relates to the sale of reactor
capacity to customers, primarily for development
purposes. Revenue is recognised on a straight-line basis
over the time period to which the capacity sold relates.
Intellectual Property Licences
Intellectual property licence income relates to the sale
of finite and perpetual period licences.
Revenue is recognised for intellectual property licences
with a right to use over a finite period when control of the
licence is transferred to the customer in accordance with
the terms of the relevant licensing agreement and
collection of the resulting receivable is reasonably assured.
Revenue is recognised for perpetual intellectual
property licences with a right to use at a point in time
when the following conditions are met:
• when a signed agreement or other persuasive
evidence of an arrangement exists;
• the intellectual property has been delivered;
• the licence fee is fixed or determinable; and
• collection of the resulting receivable is reasonably
assured.
2.23 Segmental reporting
Operating segments are reported in a manner consistent
with the internal reporting provided to the Executive
Leadership Team, who oversee the allocation of resources
and the assessment of operating segment performance.
2.24 Finance income and finance costs
The Group’s finance income and finance costs include
interest income and interest expense.
Interest income or expense is recognised using the
effective interest method. The effective interest rate is
the rate that exactly discounts estimated future cash
payments or receipts through the expected life of the
financial instrument to the gross carrying amount of the
financial asset, or the amortised cost of the financial
liability.
In calculating interest income and expense, the effective
interest rate is applied to the gross carrying amount of
the asset (when the asset is not credit impaired) or to
the amortised cost of the liability. However, for financial
assets that have become credit impaired subsequent
to initial recognition, interest income is calculated by
applying the effective interest rate to the amortised cost
of the financial asset.
Interest income or expense associated with cash and
cash equivalents, bank borrowings and lease liabilities is
treated as an operating activity cashflow in the
consolidated cashflow statement.
2.25 Pension costs
The Group operates defined contribution pension
schemes. A defined contribution plan is a pension plan
under which the Group pays fixed contributions into a
separate entity. Contributions are charged in the
Consolidated Income Statement as they become
payable in accordance with the rules of the scheme.
The Group has no further obligations once the
contributions have been made.
2.26 Share-based payments
The Group operates a number of equity-settled share-
based compensation plans under which the Group
receives services from employees as consideration for
equity instruments in IQE plc. The fair value of the
employee services received in exchange for the grant of
the options is recognised as an expense in the
consolidated income statement, and as a credit in other
reserves in the consolidated statement of changes in
equity, except for the social security element of the award
which is treated as cash settled with the liability
recognised in other taxation and social security within
trade and other payables in the consolidated balance
sheet. The total amount to be expensed is determined by
reference to the fair value of the options granted,
including any market performance conditions (for
example, an entity’s share price); excluding the impact of
any service and non-market performance vesting
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IQE Annual Report and Accounts 2024
conditions (for example, profitability, sales growth targets
and remaining an employee of the entity over a specified
time period) and including the impact of any non-vesting
conditions (for example, the requirement for employees
to save or hold shares for a specific period of time).
Non-market performance and service conditions are
included in assumptions about the number of options that
are expected to vest. The total expense is recognised over
the vesting period, which is the period over which all of the
specified vesting conditions are to be satisfied. At the end
of each reporting period, the Group revises its estimates of
the number of options that are expected to vest based on
the non-market vesting conditions. It recognises the
impact of the revision to original estimates, if any, in the
consolidated income statement, with a corresponding
adjustment to equity.
When the options are exercised, the Company issues
new shares. The proceeds received net of any directly
attributable transaction costs are credited to share
capital (nominal value) and the balance to share
premium. In the Company’s own financial statements,
the grant of share options to the employees of
subsidiary undertakings is treated as a capital
contribution. Specifically, the fair value of employee
services received (measured at the date of grant) is
recognised over the vesting period as an increase to
investment in subsidiary undertakings, with a
corresponding credit to equity in the parent entity
financial statements.
The social security contributions payable in connection
with the grant of the share options is considered an
integral part of the grant itself, and the charge will be
treated as a cash-settled transaction.
2.27 Foreign currency
Items included in the financial statements of each
subsidiary are measured using the currency of the
primary economic environment in which the subsidiary
operates (‘the functional currency’). The consolidated
financial statements are presented in sterling, which is
the Group’s presentational currency.
Foreign currency transactions are translated into the
subsidiaries’ functional currency at the rates of
exchange ruling at the date of the transaction, or at the
forward currency hedged rate where appropriate.
Monetary assets and liabilities in foreign currencies are
translated into the subsidiaries’ functional currency at
the rates ruling at the balance sheet date. All exchange
differences are taken to the income statement.
The balance sheets of overseas subsidiaries are
translated into sterling at the closing rates of exchange
at the balance sheet date, whilst the income
statements are translated into sterling at the average
rate for the period. The resulting translation differences
are taken directly to reserves.
Foreign exchange gains and losses on the retranslation
of foreign currency borrowings that are used to finance
overseas operations are accounted for on the ‘net
investment’ basis and are recorded directly in reserves
provided that the hedge is effective.
2.28 Current and deferred tax
Income tax for the year comprises current and deferred
tax. Tax is recognised in the income statement, except to
the extent that it relates to items recognised in other
comprehensive income, or directly in equity, respectively.
Current tax is the expected tax payable on the taxable
income for the year using rates substantially enacted at
the balance sheet date, and any adjustments to tax
payable in respect of prior years.
Amounts receivable from tax authorities in relation to
research and development tax relief under the RDEC
scheme are recognised within operating profit in the
period in which the research and development costs
are treated as an expense. Where amounts are
outstanding at the year end and have not been
formally agreed, an appropriate estimate of the
amount is included within other receivables.
Deferred tax is provided in full on temporary differences
between the carrying amounts of assets and liabilities in
the financial statements and the amounts used for
taxation purposes. Deferred tax is calculated at the tax
rates that have been enacted or substantially enacted
at the balance sheet date.
Deferred tax assets are only recognised to the extent that it
is probable that future taxable profits will be available
against which deductible temporary differences can be
utilised. Deferred tax liabilities are recognised for taxable
temporary differences, unless specifically exempt. Deferred
tax assets and liabilities are offset when there is a legally
enforceable right to set off current taxation assets against
current taxation liabilities and it is the intention to settle
these on a net basis.
2.29 Investment in subsidiaries
Investments in subsidiaries are held at cost of
investment less provision for impairment in the parent
company financial statements.
2.30 Other equity investments
Other equity investments are held at cost less provision
for impairment in both the parent company and Group
financial statements on the basis that the Group (and
Company) does not have the ability to exert significant
influence or control over the strategic and operating
activities of the other equity investments.
2.31 Alternative performance measures
Income Statement
Alternative income statement performance measures
are disclosed separately in the financial statements
after a number of adjusted non-cash items, non-
operational items and significant infrequent items that
would distort period on period comparability, where it is
deemed necessary by the Directors to do so to provide
further understanding of the financial performance of
the Group. Adjusted items are material items of income
or expense that have been shown separately due to the
significance of their nature or amount. The tax impact of
adjusted items is calculated applying the relevant
enacted tax rate for each adjusted item. Details of the
adjusted items are included in note 5.
Financial Statements
IQE Annual Report and Accounts 2024
127
Notes to the financial statements continued
for the year ended 31 December 2024
2. Material accounting policies continued
Balance Sheet
Alternative balance sheet performance measures for
net debt are disclosed separately in the financial
statements after adjustments to exclude lease liabilities
and fair value gains/losses on derivative instruments
where it is deemed necessary by the Directors to do so
to provide further understanding of the financial
position, gearing and liquidity of the Group.
Cashflow Statement
Alternative cash flow statement performance measures
are disclosed separately in the financial statements that
reflect the cash impact of adjusted items included in
alternative income statement performance measures.
Adjusted items are material items of income or expense
that have been shown separately due to the
significance of their nature or amount. Details of the
adjusted items are included in note 5.
3. Critical accounting judgements and key
sources of estimation uncertainty
The Group’s principal accounting policies are described
in note 2. The application of these policies necessitates
the use of estimates and judgements in a number of
areas. Accordingly, the actual amounts may differ from
these estimates. The main areas involving significant
judgement and estimation are set out below:
a) Critical accounting judgements in applying the
Group’s accounting policies
Going Concern
The going concern basis of preparation of the financial
statements has been determined by reference to
financial projections prepared to 30 June 2026 which
contain both a ‘base case’ and a ‘severe but plausible
downside case’.
In both the base case and the severe but plausible
downside case the Group is forecast to maintain
liquidity headroom and to comply with all financial
covenants contained in its banking facilities throughout
the going concern assessment period.
Key assumptions in respect of the going concern basis
of preparation is presented in note 2.2.
Intangible assets – Technology development asset
impairment
The Group has product development costs totalling
£2,828,000 linked to its Dilute Nitride technology where
the Group has taken the decision to discontinue the
development and commercialisation of the technology.
Although Dilute Nitride technology has a number of
potential applications, the level of customer and partner
engagement that is required to develop the technology
has remained low, a position that has led to the decision
to discontinue the development and commercialisation
of the technology given the lack of a clear near-term
route to the delivery of commercial volumes and
cash flows.
The current lack of visibility on the timeline to
commercialise the product development technology
assets and the decision to discontinue development of
the assets, has resulted in a non-cash intangible asset
charge of £2,828,000 that has been charged to
‘Impairment loss on intangible assets’ in the
consolidated income statement, following the write
down of all Dilute Nitride product development costs
to £nil.
Intangible assets – Technology development
assets not yet available for use
Intangible assets include development cost assets not
yet available for use of £4,054,000 (2023: £2,992,000)
which have been reviewed for impairment as at the
reporting date.
The Group is committed to the technical completion
and commercialisation of each of its technology
development assets which are governed and controlled
by reference to a combination of technical
development objectives and market and customer
related commercial plans. The recoverable amount of
each technology development project is determined
based on value in use calculations, using cash flow
projections in line with the expected useful economic life
of each asset. The value in use calculations are based
on management approved risk-adjusted cash flow
forecasts for each project and comprise assumptions
that include cost to complete forecasts for each
technology development and commercial forecasts
relating to the expected level of market penetration,
revenue and cost of production for each technology.
128
IQE Annual Report and Accounts 2024
Identification of Cash Generating Units (‘CGUs’) for
impairment testing and allocating impairment
losses
Identification of cash generating units
Under IAS 36, impairment is assessed at the individual
asset level except in circumstances where individual
assets do not generate cash inflows that are largely
independent from other assets. In these circumstances
impairment is tested at the CGU or group of CGUs level.
Based on the nature of the Group’s operations, multiple
production facilities and epitaxial assets are considered
by the Group to form distinct CGUs. This reflects the
interdependency and dual-purpose nature of the
Group’s manufacturing facilities, and that production
can (and is) transferred between sites to suit capacity
planning and operational efficiency.
Given the interdependency of the Group’s
manufacturing facilities and operations the Group
considers each of the Photonics and Wireless operating
segments to be CGUs based on the type of production.
In the judgement of the Directors, the assets of the
Group’s Taiwanese subsidiary, which the Directors are
considering divesting as part of the ongoing strategic
review, is included in the Wireless CGU due to its
interdependency with the rest of that CGU.
CGU-level impairment testing has been performed at
the level of the Photonics and Wireless CGUs. An
impairment loss of £3,066,000 has been identified for
the Wireless CGU. Had the assets of the Group’s
Taiwanese subsidiary been identified as a separate
CGU and tested separately from the remainder of the
Wireless CGU, no impairment would have been
identified in respect of the Taiwanese assets; though a
larger impairment may have been identified in respect
of the remainder of the Wireless CGU.
Allocating impairment losses
When assigning an impairment loss to assets within the
scope of IAS 36, the impairment loss is required to first
reduce the carrying value of goodwill to nil and then
allocate any remaining loss pro rata based on the
carrying value of other assets in the CGU, except that
the carrying value of an individual asset within the CGU
should not be reduced below the higher of its fair value
less costs of disposal, its value in use and zero. The
Wireless CGU does not contain any goodwill.
In the Directors judgement, developments in the
strategic review post year end have led the directors to
conclude that the fair value less costs of disposal of
individual assets in the Wireless CGU for the Taiwan-
based assets of the CGU were in excess of their carrying
value at the reporting date. As a result, the impairment
loss recognised in the Wireless CGU has been allocated
pro-rata to US-based intangible and tangible assets (i.e.
not to Taiwanese assets), reflecting production volume
allocations and capacity planning assumptions and
cash flow forecasts used to estimate the impairment.
Refer to note 13 for further details.
Adjustments to profit
Alternative performance measures are disclosed
separately in the financial statements after a number of
adjusted non-cash, non-operational or significant and
infrequent items that would distort period on period
comparability, where it is deemed necessary by the
Directors to do so to provide further understanding of
the financial performance of the Group. Details of the
adjusted items are included in note 5.
b) Critical accounting estimates and key sources
of estimation uncertainty
3.1 Cash Generating Unit impairment testing
At the end of each reporting period, the Group assesses
whether there is any indication of impairment of non-
current assets allocated to the Group’s CGUs. Multiple
production facilities and production assets are included in
a single CGU reflecting that production can (and is)
transferred between sites and production assets for
different operating segments to suit capacity planning and
operational efficiency. Given the interdependency of
facilities and production assets, non-current assets are
tested for impairment by grouping operational sites and
production assets into CGUs based on type of production.
The Group has continued to experience weak customer
demand and low customer orders following the global
semiconductor industry downturn as market recovery
has been slower than anticipated in key sectors, driven
primarily by weak consumer demand in end markets.
Weak customer demand, resulting in depressed sales
that have remained broadly flat year-on-year, has
resulted in the Group continuing to deliver either low
levels of profitability or operating losses in each of its
Wireless and Photonics CGUs, a position that has been
considered as part of the impairment tests.
Photonics
The recoverable amount of the Photonics CGU of
£121,751,000, determined based on value in use calculations
is greater than the carrying amount (£121,196,000) of the
associated intangible assets, property, plant and
equipment, right-of-use assets and working capital
allocated to the CGU such that no impairment of Photonics
CGU assets has been identified.
Key assumptions and sensitivity analysis in respect of
the recoverable amount of the Photonics CGU is
presented in note 13.
Wireless
The recoverable amount of the Wireless CGU of
£88,341,000, determined based on value in use calculations
is lower than the carrying amount (£91,407,000) of the
associated intangible assets, property, plant and
equipment, right-of-use assets and working capital
allocated to the CGU such that an impairment of Wireless
CGU assets has been identified.
The noncash impairment loss of £3,066,000 relates to the
Group’s US related wireless assets and has been allocated
to the relevant US based intangible and tangible assets
which has resulted in a non-cash intangible asset
impairment charge of £885,000 and a non-cash property,
plant and equipment impairment charge of £2,181,000.
Key assumptions and sensitivity analysis in respect of
the recoverable amount of the Wireless CGU is
presented in note 13.
Financial Statements
IQE Annual Report and Accounts 2024
129
Notes to the financial statements continued
for the year ended 31 December 2024
3. Critical accounting judgements and key
sources of estimation uncertainty continued
c) Other accounting estimates and sources of
estimation uncertainty
3.2 Useful economic lives of development cost
intangible assets
The periods of amortisation used for product and
process development cost assets require estimates to
be made on the estimated useful economic lives of the
intangible assets to determine an appropriate rate of
amortisation. Capitalised development costs are
amortised in line with the expected production volume
profile of the products to which they relate over the
period during which economic benefits are expected to
be received, which is typically between 3-8 years.
The carrying value of development cost intangible
assets is £12,528,000 (2023: £19,063,000). The
amortisation charge for development cost intangible
assets in the current year is £5,084,000 (2023:
£5,996,000). If useful economic lives of development
cost intangible assets were reduced by 1 year across
the whole portfolio of assets, the impact on current year
amortisation would be to increase the charge by
£786,000 (2023: £855,000) to £5,870,000 (2023:
£6,851,000).
3.3 Valuation of lease liabilities and right-of-use
assets
The application of IFRS 16 requires the Group to make
judgements and estimates that affect the valuation of
the lease liabilities and the valuation of right-of-use
assets that includes determining the contracts in scope
of IFRS 16, determining the contract term and
determining the interest rate used for discounting of
future cash flows.
The lease term determined by the Group generally
comprises the non-cancellable period of lease
contracts, periods covered by an option to extend the
lease if the Group is reasonably certain to exercise that
option, and periods covered by an option to terminate
the lease if the Group is reasonably certain not to
exercise that option.
Exercise of extension options, principally existing in the
Group’s property leases, are assumed to be reasonably
certain, except for the Group’s Newport facility where it
has been assumed that it is reasonably certain that the
Group will exercise its buy-out option at the end of the
initial lease term. The same term applied to the length of
the lease contract has been applied to the useful
economic life of right-of-use assets.
The present value of the lease payments applicable to
the Group’s portfolio of property and plant leases has
been determined using a discount rate that represents
the Group’s incremental rate of borrowing at the date of
inception or modification of the lease, assessed as
2.25%-8.20% depending on the lease characteristics for
existing historic leases.
If the incremental rate of borrowing decreased by 0.10%,
the impact would be to increase the lease liability by
£140,000 (2023: £156,000). If the incremental rate of
borrowing decreased by 1.0%, the impact would be to
increase the lease liability by £1,463,000 (2023:
£1,560,000).
3.4 Share-based payments
Share-based payment charges associated with long-
term incentive plans are calculated taking account of
an assessment of the achievability of relevant
performance conditions. The share-based payment
charge for long-term incentive awards would be
£138,000 (2023: £713,000) greater in 2024 if it were
assumed that all performance criteria for existing
awards would be met.
130
IQE Annual Report and Accounts 2024
4. Segmental analysis
4.1 Description of segments and principal activities
The Chief Operating Decision-Maker is defined as the Executive Leadership Team (‘ELT’). The ELT, prior to the
departure of the Chief Executive Officer on 29 October 2024 consisted of the Chief Executive Officer, Chief Financial
Officer, Chief Technology Officer, Chief People Officer, Executive VP Global Business Development, SVP of
Communications Infrastructure and Security Business Unit, VP US Sales, Director of Corporate Marketing, VP US EPI
Operations and Substrates, VP Asia and Europe EPI Operations, VP Government Affairs, Chief of Staff and the
Executive VP General Counsel & Company Secretary. Subsequent to the departure of the Chief Executive Officer, the
ELT has been restructured and from November 2024 the ELT consists of the Interim Chief Executive Officer and Chief
Financial Officer, Chief Technology and Operating Officer, Chief Revenue Officer and the Executive VP General
Counsel, Company Secretary and Chief People Officer. The Executive Leadership Team 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.
• CMOS++ – 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. Starting in 2025, the Group will no longer report CMOSS++ revenue as a standalone
segment reflecting the strategic rebalancing of the business' product portfolio and a shift in focus towards
diversification into GaN Power and MicroLED.
The ELT primarily use revenue and a measure of adjusted EBITDA to assess the performance of the operating
segments. Measures of total assets and liabilities for each reportable segment are not reported to the ELT and
therefore have not been disclosed.
Financial Statements
IQE Annual Report and Accounts 2024
131
Notes to the financial statements continued
for the year ended 31 December 2024
4. Segmental analysis continued
4.2 Adjusted EBITDA Loss
Adjusted EBITDA 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 and
CFO recruitment costs, CEO severance costs and impairments where the impairment is the result of an isolated,
non-recurring event. Adjusted EBITDA 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.
Revenue
2024
£’000
2023
£’000
Wireless
67,295
53,877
Photonics
49,876
59,098
CMOS++
863
2,277
Revenue
118,034
115,252
Adjusted EBITDA
Wireless
16,205
12,347
Photonics
5,840
6,189
CMOS++
(1,517)
(1,919)
Central corporate costs
(12,416)
(12,304)
Adjusted EBITDA
8,112
4,313
Depreciation
(20,343)
(16,976)
Amortisation
(6,390)
(7,688)
Gain on remeasurement
202
-
Profit on disposal of PPE
62
152
Adjusted operating loss
(18,357)
(20,199)
Adjusted items (see note 5)
Wireless
(7,441)
(1,004)
Photonics
(5,974)
(2,445)
CMOS++
(669)
(45)
Central corporate costs
(517)
(2,086)
Operating loss
(32,958)
(25,779)
Finance costs
(3,947)
(3,032)
Loss before tax
(36,905)
(28,811)
Adjusted items include £8,418,000 (2023: £nil) of non-cash impairment charges of which £5,159,000 (2023: £nil)
relates to the wireless segment and £3,259,000 (2023: £nil) relates to the photonics segment.
132
IQE Annual Report and Accounts 2024
4.3 Revenue – Disaggregation of segmental revenue from contracts with customers
The group derives revenue from the transfer of goods, services and intellectual property over time and at a point in
time. Revenues from external customers derive from the sale of standard or bespoke compound semiconductor
material, or from the sale or licensing of intellectual property.
Disaggregate Segment Revenue
Wireless
2024
£’000
Photonics
2024
£’000
CMOS++
2024
£’000
Total
2024
£’000
Timing of revenue recognition
At a point in time
Standard customer products
–
7,852
–
7,852
Intellectual property licences
–
–
–
–
Over time
Bespoke customer products
67,295
42,024
863
110,182
Total revenue
67,295
49,876
863
118,034
Disaggregate Segment Revenue
Wireless
2023
£’000
Photonics
2023
£’000
CMOS++
2023
£’000
Total
2023
£’000
Timing of revenue recognition
At a point in time
Standard customer products
–
8,982
–
8,982
Intellectual property licences
–
–
–
–
Over time
Bespoke customer products
53,877
50,116
2,277
106,270
Total revenue
53,877
59,098
2,277
115,252
Included within bespoke customer product revenue is revenue of £45,379,000 (2023: £50,712,000) that relates to
supplier managed inventory arrangements where billing occurs from the earlier of a specified contractual backstop
date following delivery, or when the product is drawn from inventory by the customer.
Revenues of approximately £37,752,000 (2023: £45,961,000) are derived from two customers (2023: three) who each
account for greater than 10% of the Group’s total revenues:
Customer
Segment
2024
£’000
2024
% revenue
2023
£’000
2023
% revenue
Customer 1
Wireless
22,169
19%
18,268
16%
Customer 2
Photonics
N/A
N/A
13,625
12%
Customer 3
Photonics & Wireless
15,583
13%
14,067
12%
There are no customers in the CMOS++ segment that account for greater than 10% of the Group’s total revenue.
Financial Statements
IQE Annual Report and Accounts 2024
133
Notes to the financial statements continued
for the year ended 31 December 2024
4. Segmental analysis continued
4.4 Geographical information
Revenue by location of customer
2024
£’000
2023
£’000
Americas
52,025
54,520
United States of America
51,974
54,448
Rest of Americas
51
72
Europe, Middle East & Africa (EMEA)
24,914
16,226
France
663
1,319
Germany
1,618
1,853
Israel
5,008
3,826
United Kingdom
12,642
7,490
Rest of EMEA
4,983
1,738
Asia Pacific
41,095
44,506
People’s Republic of China
1,928
2,157
Japan
6,456
14,326
Taiwan
27,142
25,174
Rest of Asia Pacific
5,569
2,849
Total revenue
118,034
115,252
Non-current assets by location
Property, plant and equipment
Intangible assets
Right-of-useassets
2024
£’000
2023
£’000
2024
£’000
2023
£’000
2024
£’000
2023
£’000
USA
32,651
44,733
13,679
17,849
15,312
8,354
Taiwan
28,060
32,495
1,171
1,623
386
433
UK
52,963
52,325
14,100
15,906
26,512
29,108
113,674
129,553
28,950
35,378
42,210
37,895
134
IQE Annual Report and Accounts 2024
5. Adjusted performance measures (‘APM’)
The Directors assess the operating performance of the Group based on both statutory and adjusted measures.
Adjusted measures include adjusted earnings before interest, tax, depreciation, amortisation, impairment and
profit/loss on disposal of PPE and intangibles (AEBITDA), AEBITDA margin, adjusted operating loss, adjusted loss
before income tax and adjusted losses per share. These measures are collectively described as Adjusted
Performance Measures (APMs) in this Annual Report. The Directors believe that APMs provide a useful comparison of
business trends and performance and allow management and other stakeholders to better compare the
performance of the Group between periods, 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 APMs
for internal planning, budgeting, reporting and assessment of the performance of the business. The term adjusted is
not defined under IFRS and therefore the APMs may not be directly comparable with similarly titled measures used
by other companies.
Adjusted profit measures
The following table summarises the statutory and adjusted profit and loss account measures for the year together
with the adjustments made to each line item.
Adjusted
Results
£’000
Adjusted
Items
£’000
2024
Reported
Results
£’000
Adjusted
Results
£’000
Adjusted
Items
£’000
2023
Reported
Results
£’000
Revenue
118,034
–
118,034
115,252
–
115,252
Cost of sales
(112,543)
(1,045)
(113,588)
(111,244)
(1,680)
(112,924)
Gross profit/(loss)
5,491
(1,045)
4,446
4,008
(1,680)
2,328
SG&A
(24,109)
(5,873)
(29,982)
(26,167)
(6,319)
(32,486)
Impairment of intangibles
–
(3,772)
(3,772)
–
–
–
Impairment of PPE
–
(4,615)
(4,615)
–
–
–
Impairment of right-of-use assets
–
(31)
(31)
–
–
–
Gain on remeasurement of right-of-use
asset
202
–
202
–
–
–
Impairment (loss)/reversal on
receivables
(3)
–
(3)
1,808
–
1,808
Gains on acquisitions
–
–
–
–
2,419
2,419
Profit on disposal of PPE
62
735
797
152
–
152
EBITDA
8,112
(6,918)
1,194
4,313
(5,580)
1,267
Depreciation
(20,343)
–
(20,343)
(16,976)
–
(16,976)
Amortisation
(6,390)
–
(6,390)
(7,688)
–
(7,688)
Impairment of intangibles
–
(3,772)
(3,772)
–
–
–
Impairment of PPE
–
(4,615)
(4,615)
–
–
–
Impairment of right-of-use assets
–
(31)
(31)
–
–
–
Gain on remeasurement of right-of-use
asset
202
–
202
–
–
–
Profit on disposal of PPE
62
735
797
152
–
152
Operating loss
(18,357)
(14,601)
(32,958)
(20,199)
(5,580)
(25,779)
Finance costs
(3,947)
–
(3,947)
(3,032)
–
(3,032)
Loss before tax
(22,304)
(14,601)
(36,905)
(23,231)
(5,580)
(28,811)
Taxation
(1,430)
157
(1,273)
(759)
192
(567)
Loss for the period
(23,734)
(14,444)
(38,178)
(23,990)
(5,388)
(29,378)
Loss per share attributable to owners
of the parent company during the year
Basic loss per share
(2.46p)
1.50p
(3.96p)
(2.68p)
0.60p
(3.28p)
Diluted loss per share
(2.46p)
1.50p
(3.96p)
(2.68p)
0.60p
(3.28p)
Financial Statements
IQE Annual Report and Accounts 2024
135
Notes to the financial statements continued
for the year ended 31 December 2024
5. Adjusted performance measures (‘APM’) continued
Adjustments to operating profit
2024
Cost of
sales £’000
SG&A
£’000
Impairments
£’000
Profit on
disposal
£’000
2024
Adjusted
Pre-Tax
Items
£’000
Tax
Impact
£’000
2024
Adjusted
Items
£’000
Share-based payments
(1,045)
(1,929)
–
–
(2,974)
157
(2,817)
Share-based payments – CEO
recruitment
–
(77)
–
–
(77)
–
(77)
Share-based payments – CFO
recruitment
–
(123)
–
–
(123)
–
(123)
CEO recruitment
–
(307)
–
–
(307)
–
(307)
CEO severance
–
(416)
–
–
(416)
–
(416)
Wireless CGU impairment
–
–
(3,066)
–
(3,066)
–
(3,066)
Restructuring
–
(3,021)
(5,352)
735
(7,638)
–
(7,638)
Total
(1,045)
(5,873)
(8,418)
735
(14,601)
157
(14,444)
2023
Cost of sales
£’000
SG&A
£’000
Other
Gains
£’000
2023
Adjusted
Pre-Tax
Items
£’000
Tax
Impact
£’000
2023
Adjusted
Items
£’000
Share-based payments
(1,680)
(840)
–
(2,520)
192
(2,328)
Share-based payments – CEO
recruitment
–
(45)
–
(45)
–
(45)
CEO recruitment
–
(300)
–
(300)
–
(300)
CFO severance & recruitment
–
(454)
–
(454)
–
(454)
Restructuring
–
(4,680)
–
(4,680)
–
(4,680)
Gain on deemed disposal of JV
–
–
2,419
2,419
–
2,419
Total
(1,680)
(6,319)
2,419
(5,580)
192
(5,388)
The nature of the adjusted items is as follows:
Share-based payments
The £2,974,000 (2023: 2,520,000) charge relates to share-based payments recorded in accordance with IFRS 2
‘Share-based payment’. Share-based payments which arise each financial year are classified as an APM due to the
non-cash charge being partially outside of the Group's control as it is based on factors such as share price volatility
and interest rates which may be unrelated to the performance of the Group during the period in which the expense
occurred.
Chief Executive Officer recruitment
The charge of £77,000 (2023: £45,000) relates to the share-based payment charge for new starter awards granted
to the former CEO upon recruitment. The charge of £307,000 (2023: £300,000) relates to costs associated with the
cash element of the new starter award granted to the former CEO upon recruitment.
Chief Financial Officer recruitment
The charge of £123,000 (2023: £nil) relates to the share-based payment charge for new starter awards granted to
the CFO. Chief Financial Officer severance and recruitment costs of £454,000 in 2023 related to settlement and legal
costs in relation to the former Chief Financial Officer and recruitment costs in relation to the newly appointed Chief
Financial Officer.
Chief Executive Officer Severance
The charge of £416,000 (2023: £nil) relates to costs, primarily related to payments in lieu of notice, associated with the
termination of the former CEO’s employment.
136
IQE Annual Report and Accounts 2024
Wireless CGU impairment
An impairment was identified in the year relating to the Wireless CGU determined based on value in use calculations. The
non-cash impairment loss of £3,066,000 relates to the Group’s US related wireless assets and has been allocated to the
relevant US based intangible and tangible assets which has resulted in a non-cash intangible asset impairment charge of
£885,000 and a non-cash property, plant and equipment impairment charge of £2,181,000 (see note 13).
Restructuring
The charge of £7,638,000 (2023: £4,680,000) relates to the consolidation of the Group’s US, UK and Asian
manufacturing operations and the restructuring of the Group’s Executive Leadership Team.
Group Restructuring
Group restructuring charges of £266,000 (2023: £nil) consist of employee-related costs of £266,000 (2023: £nil)
related to the restructuring of the Group’s Executive Leadership Team following the departure of the former CEO.
Group restructuring charges of £1,290,000 in 2023 related to employee costs and redundancies associated with
a group-wide restructuring programme.
US Restructuring
US restructuring charges of £763,000 (2023: £3,390,000) relating to the closure of the Group’s manufacturing
facility in Pennsylvania consist of employee-related costs of £261,000 (2023: £1,789,000), site decommissioning
costs of £1,014,000 (2023: £1,601,000), non-cash property, plant and equipment asset impairments of £89,000
(2023: £nil) and profit on disposal of property, plant and equipment of £632,000 (2023: £nil). As at 31 December
2024, cumulative restructuring charges of £6,164,000 (2023: £5,346,000) have been incurred. No further
restructuring charges associated with the closure of the site are expected in 2025.
US restructuring charges of £4,889,000 (2023: £nil) relating to the strategic re-positioning of the Group’s
Massachusetts and North Carolina manufacturing sites consist of non-cash property, plant and equipment
asset impairments of £2,002,000 (2023: £nil) and non-cash intangible development cost impairments of
£2,887,000 (2023: £nil).
UK Restructuring
UK restructuring charges of £1,584,000 (2023: £nil) relating to the consolidation of the Group’s South Wales
activities into its Newport manufacturing site consist of employee-related costs of £447,000 (2023: £nil), site
decommissioning costs of £897,000 (2023: £nil), non-cash property, plant and equipment asset impairments of
£343,000 (2023: £nil) and profit on disposal of PPE of £103,000 (2023: £nil).
Asian Restructuring
Taiwanese restructuring charges of £155,000 (2023: £nil) consist of legal and professional fees relating to the
dual track IPO or sale of the Group’s Taiwanese manufacturing operations.
Singapore restructuring credit of £19,000 (2023: £nil) relates to certain final cash receipts linked to the voluntary
liquidation of the Group’s Singapore subsidiaries, where manufacturing operations ceased in June 2022.
Gain on deemed disposal of joint venture
Gain on acquisitions of £nil (2023: £2,419,000) relates to the gain recognised on acquisition of the remaining shares in
the Group’s joint venture, CSC, in 2023 increasing its shareholding to 100%.
Financial Statements
IQE Annual Report and Accounts 2024
137
Notes to the financial statements continued
for the year ended 31 December 2024
5. Adjusted performance measures (‘APM’) continued
Cash impact of adjusting items
The cash impact of adjusting items is set out below:
Cash Impact
Cash from
operations
£’000
Investing
activities
£’000
2024 Total
£’000
Cash from
operations
£’000
Investing
activities
£’000
2023 Total
£’000
Reported cash flows
2,472
(10,194)
(7,722)
10,074
–
10,074
Share-based payments – social
security
123
–
123
–
–
–
CEO recruitment
–
–
–
463
–
463
CEO severance
196
–
196
–
–
–
CFO severance & recruitment
–
–
–
454
–
454
Onerous contract
394
–
394
256
–
256
Restructuring
4,092
(4,828)
(736)
4,497
–
4,497
Total adjusted items
4,805
(4,828)
(23)
5,670
–
5,670
Adjusted cash flows
7,277
(15,022)
(7,745)
15,744
–
15,744
Onerous contract
Onerous contract cash flows reflect royalty payments relating to the Group’s cREO™ technology where development
activity ceased in prior periods totals £394,000 (2023: £256,000).
Restructuring
Cash generated in the year from the restructuring of the Group’s Executive Leadership Team and the consolidation
of the Group’s US, UK and Asian manufacturing operations totalled £736,000 (2023: £4,497,000 cash defrayed)
Group Restructuring
Cash costs defrayed of £64,000 (2023: £nil) consist of employee-related costs related to the restructuring of the
Group’s Executive Leadership Team following the departure of the former CEO. Cash costs of £1,290,000 in 2023
related to employee costs and redundancies associated with a group-wide restructuring programme.
US Restructuring
Cash costs relating to the closure of the Group’s manufacturing facility in Pennsylvania total £6,856,000 (2023:
£4,037,000) of which, £2,820,000 (2023: £3,087,000) has been defrayed in the current period. Cash proceeds on
disposal of PPE is included in investing activities and totals £4,061,000 (2023: £nil) in the year.
UK Restructuring
Cash costs relating to the consolidation of the Group’s South Wales activities into its Newport manufacturing site
total £1,072,000 (2023: £nil). Cash proceeds on disposal of property, plant and equipment is included in investing
activities and totals £767,000 (2023: £nil) in the year.
Asian Restructuring
Cash costs relating to the dual track IPO or sale of the Group’s Taiwanese manufacturing operations total
£155,000 (2023: £nil)
Final cash receipts linked to the voluntary liquidation of the Group’s Singapore subsidiaries, where
manufacturing operations ceased in June 2022 total £19,000.
Adjustments to net debt
Adjusted net debt
2024
£’000
2023
£’000
Net debt (note 29)
(69,330)
(48,528)
Lease liabilities due after one year
44,872
40,435
Lease liabilities due within one year
5,658
5,865
Adjusted net debt
(18,800)
(2,228)
138
IQE Annual Report and Accounts 2024
6. Operating loss
2024
£’000
2023
£’000
The operating loss is stated after charging/(crediting):
Depreciation of property, plant and equipment
16,552
13,186
Depreciation of right-of-use assets
3,791
3,790
Amortisation of intangible assets
6,390
7,688
Gain on remeasurement of right-of-use asset
(202)
–
Services provided by auditors
821
830
Expenses relating to variable lease payments not included in the measurement of the
lease liability
66
4,818
Research and development (net)
4,489
1,823
Exchange gains
(511)
(1,108)
Cost of raw materials consumed
45,255
43,412
Profit on disposal of PPE*
(62)
(152)
Adjusted items (see note 5)
14,601
5,580
Share-based payments
2,971
2,520
Share-based payments – CEO & CFO recruitment
203
45
CEO recruitment
307
300
CEO severance
416
–
CFO severance & recruitment
–
454
Gain on deemed disposal of JV
–
(2,419)
Wireless CGU impairment
3,066
–
Restructuring
7,638
4,680
* Excludes the adjustment for profit on disposal of PPE relating to restructuring which is separately disclosed as part of the Group’s
adjusted items.
Expenses relating to variable lease payments not included in the measurement of the lease liability principally relate
to the variable cash costs of production based on usage that were payable to the Group’s joint venture, CSC,
associated with the Group’s right-of-use of the joint venture’s assets. The Group acquired its joint venture, CSC, on 22
September 2023.
2024
£’000
2023
£’000
Services provided by auditors
Fees payable to the Company’s auditor and its associates for the audit of the parent
company and consolidated financial statements
720
671
Additional fees payable in relation to the audit of the parent company and consolidated
financial statements for the year ended 31 December 2023
25
–
Additional fees payable in relation to the audit of the parent company and consolidated
financial statements for the year ended 31 December 2022
–
134
Fees payable to the Company’s auditor and its associates for other services:
• Audit of the Company’s subsidiaries
25
25
• Audit-related assurance services
51
–
Total KPMG LLP (Group auditors)
821
830
Financial Statements
IQE Annual Report and Accounts 2024
139
Notes to the financial statements continued
for the year ended 31 December 2024
7. Employee costs
2024
£’000
2023
£’000
Employee costs (including Directors’ remuneration)
Wages and salaries
30,012
33,960
Social security costs
3,364
3,566
Other pension costs
2,096
2,024
Share-based payments
3,174
2,565
38,646
42,115
2024
Number
2023
Number
Average number of employees (including Directors)
Manufacturing
396
446
Selling, general and administrative
121
131
517
577
Directors’ emoluments, share options and other long-term incentive plan details, including details of all outstanding
options and long-term incentive awards, and the value of Director pension contributions paid, are set out in the
Remuneration Report where the relevant disclosures have been highlighted as audited.
Key management within the Group comprises members of the Executive Leadership Team and Non-Executive
Directors. Compensation to key management in 2024 totalled £4,151,000 (2023: £4,212,000), consisting of emoluments
and other benefits in kind of £4,023,000 (2023: £4,106,000) and pension contributions of £128,000 (2023: £106,000). The
charge for share-based payment awards to key management totalled £1,007,000 (2023: £1,001,000). A charge for
termination costs payable to key management who have left the business totalled £628,000 (2023: £424,000).
8. Finance costs
2024
£’000
2023
£’000
Bank and other loans
(2,293)
(1,810)
Interest expense on lease liabilities
(1,654)
(1,222)
(3,947)
(3,032)
140
IQE Annual Report and Accounts 2024
9. Taxation
Income tax expense
2024
£’000
2023
£’000
Current tax on profits for the year
1,106
1,112
Total current tax charge
1,106
1,112
Origination and reversal of temporary differences
85
(407)
Adjustment in respect of prior years
82
(138)
Total deferred tax charge/(credit)
167
(545)
Total tax charge
1,273
567
The tax on the Group’s loss before tax differs from the theoretical amount that would arise from applying the
standard rate of corporation tax in the UK of 25.0% (2023: 23.5%) as follows:
2024
£’000
2023
£’000
Loss on ordinary activities before taxation
(36,905)
(28,811)
Tax credit at 25.0% thereon (2023: 23.5%)
(9,226)
(6,771)
Effects of:
Expenses not deductible for tax purposes
1,241
2,366
Overseas tax rate differences
(28)
(126)
Temporary differences for which no deferred tax asset was recognised
8,566
4,787
Share option schemes
638
449
Adjustments in respect of prior years
82
(138)
Total tax charge for the year
1,273
567
Recognition of deferred tax assets is based on an assessment of future cash flow forecasts and the associated
profitability of the Group’s operations, an assessment which has restricted the ability of the Group to recognise
deferred tax assets for UK, US and Singapore trading losses.
Deferred tax asset recognition has been restricted in the UK and US to reflect future forecast profitability, an
assessment that includes the impact of the continuation of weak customer demand as market recovery is forecast
to remain subdued in certain key sectors following the global semiconductor industry downturn. As a result, lower
utilisation of UK and US deferred tax assets is projected, which has restricted the ability to recognise deferred tax
assets for current year losses.
Deferred tax asset recognition has not been recognised in Singapore due to the closure of the manufacturing site in
2022.
The share option schemes amount shown above represents the change in the expected tax impact on the exercise
of options, principally reflecting the reduction in future corporation tax deductions associated with a movement in
the number of options where performance criteria are expected to be achieved and a reduction in the Group
share price.
The Group’s results report certain financial measures after a number of adjusted items with a tax impact of £157,000
(2023: £192,000) as detailed in note 5. The tax impact of adjusted items, excluding share-based payments, is £nil due
to the restricted recognition of deferred tax assets.
Deferred tax is measured at the tax rates that are expected to apply in the relevant territory in the period when the
asset is realised or the liability is settled, based on tax rates and tax laws that have been substantively enacted at
the balance sheet date.
Any closing UK deferred tax asset or liability in the financial statements has been recognised in accordance with the
rate enacted as part of the Finance Act 2021 with any timing differences recognised at a corporation tax rate of 25%.
Amounts recognised directly in equity
2024
£’000
2023
£’000
Aggregate current and deferred tax arising in the period and not recognised in net profit
or loss or other comprehensive income but directly debited or credited to equity:
Deferred tax: Share options
(33)
(142)
Total tax charge to equity for the year
(33)
(142)
Financial Statements
IQE Annual Report and Accounts 2024
141
Notes to the financial statements continued
for the year ended 31 December 2024
10. Deferred Taxation
Deferred tax
2024
£’000
2023
£’000
At 1 January
(604)
(1,065)
Income statement credit recognised in the year
(167)
545
Tax charge recognised directly in equity
(33)
(142)
Exchange differences
30
58
At 31 December
(774)
(604)
The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of
balances within the same tax jurisdiction, is as follows:
Group
Deferred tax liabilities
Right of Use
Asset
£’000
Accelerated
Capital
Allowances
£’000
Intangibles
£’000
Total
£’000
At 1 January 2023
(10,128)
(12,454)
(3,183)
(25,765)
(Charge)/credit to income statement
708
968
(29)
1,647
Exchange differences
139
223
42
404
At 31 December 2023
(9,281)
(11,263)
(3,170)
(23,714)
(Charge)/credit to income statement
(1,014)
(355)
1,491
122
Exchange differences
(88)
40
18
(30)
At 31 December 2024 before set-off
(10,383)
(11,578)
(1,661)
(23,622)
Set-off of tax*
22,848
At 31 December 2024 after set-off
(774)
Deferred tax assets
Leases
£’000
Tax Losses
£’000
Other
£’000
Total
£’000
At 1 January 2023
12,479
11,798
423
24,700
Charged to income statement
(957)
(761)
616
(1,102)
Charged to equity
–
–
(142)
(142)
Exchange differences
(146)
(186)
(14)
(346)
At 31 December 2023
11,376
10,851
883
23,110
Charged to income statement
686
(729)
(246)
(289)
Charged to equity
–
–
(33)
(33)
Exchange differences
85
–
(25)
60
At 31 December 2024 before set-off
12,147
10,122
579
22,848
Set-off of tax*
(22,848)
At 31 December 2024 after set-off
–
* Deferred tax assets and deferred tax liabilities can only be offset in the statement of financial position if the entity has the legal right to settle
current tax amounts on a net basis and the deferred tax amounts are levied by the same taxing authority on the same entity or different
entities that intend to realise the asset and settle the liability at the same time.
Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax
benefit through future taxable profits from the same trade is probable. The Group assesses future forecast taxable
profit as probable by reference to Board-approved five-year cashflow forecasts consistent with the underlying
cashflow forecasts used in the Group’s goodwill impairment review. Any potential deferred tax asset assessed by
reference to the level of future forecast taxable profit over this five-year period has, in the current year, been
restricted to the extent of taxable temporary differences due to the Group’s current financial performance and
recent history of taxable losses in its UK, US and Singapore operations.
The Group did not recognise deferred tax assets of £60,209,000 (2023: £52,968,000) in respect of tax losses
amounting to £256,787,000 (2023: £228,197,000) that can be carried forward against future taxable income.
The Group did not recognise other deferred tax assets of £7,723,000 (2023: £3,816,000) in respect of other carried
forward temporary timing differences relating to certain US accelerated capital allowances, interest restrictions
and R&D restrictions and UK notional tax credits associated with the Groups R&D Expenditure Credit Scheme
(RDEC) claims amounting to £24,148,000 (2023: 8,967,000).
Tax losses in the UK totalling £173,474,000 (2023: £135,278,000) have no date of expiry. Tax losses in Singapore totalling
£39,287,000 (2023: £39,713,000) have no date of expiry. Tax losses in the US can be carried forward against future
142
IQE Annual Report and Accounts 2024
taxable income for 20 years before expiring. Of the Group’s total US tax losses of £84,514,000 (2023: £96,858,000)
losses amounting to £16,090,426 expire within 5 years, £34,592,000 expire within 6-10 years, £11,024,000 expire within 11-
15 years and £22,809,000 may be carried forward indefinitely.
Deferred tax liabilities have not been recognised for the withholding tax and other taxes that would be payable on
the unremitted earnings of certain subsidiaries, as such amounts are permanently reinvested. Unremitted
Taiwanese earnings total £34,365,000 (2023: £32,471,000). Tax credits in relation to claims made under the R&D
Expenditure Credit Scheme (RDEC) in the UK are recognised within operating loss. Tax credits of this nature total
£1,528,000 (2023: £1,914,000).
Company
Deferred tax assets
Tax Losses
£’000
Share
Options
£’000
Other Timing
Differences
£’000
Total
£’000
At 1 January 2023
744
72
(816)
–
(Charged)/credited to income statement
777
19
(794)
2
Charged to equity
–
(2)
–
(2)
At 31 December 2023
1,521
89
(1,610)
–
(Charged)/credited to income statement
263
61
(324)
–
Charged to equity
–
–
–
–
At 31 December 2024
1,784
150
(1,934)
–
The Company did not recognise deferred tax assets of £7,568,000 (2023: £6,511,000) in respect of tax losses
amounting to £30,273,000 (2023: £26,043,000) that can be carried forward against future taxable income. The
Company did not recognise other deferred tax assets of £39,000 (2023: £39,000) in respect of UK notional tax credits
associated with R&D Expenditure Credit Scheme (RDEC) claims.
11. Dividends
No dividend has been paid or proposed in 2024 (2023: £nil).
12. 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 5.
2024
£’000
2023
£’000
Loss attributable to ordinary shareholders
(38,178)
(29,378)
Adjustments to loss after tax (note 5)
14,444
5,388
Adjusted loss attributable to ordinary shareholders
(23,734)
(23,990)
2024
Number
2023
Number
Weighted average number of ordinary shares
964,315,248
896,744,318
Dilutive share options
14,291,760
10,155,464
Adjusted weighted average number of ordinary shares
978,607,008
906,899,782
Adjusted basic loss per share
(2.46p)
(2.68p)
Basic loss per share
(3.96p)
(3.28p)
Adjusted diluted loss per share
(2.46p)
(2.68p)
Diluted loss per share
(3.96p)
(3.28p)
Financial Statements
IQE Annual Report and Accounts 2024
143
Notes to the financial statements continued
for the year ended 31 December 2024
13. Intangible assets
Group
Goodwill
£’000
Patents
£’000
Development
costs
£’000
Software
£’000
Customer
contracts
£’000
Total
£’000
Cost
At 1 January 2024
68,186
8,318
91,662
16,449
1,490
186,105
Additions
–
163
1,877
1,419
–
3,459
Foreign exchange
1,202
5
941
16
–
2,164
At 31 December 2024
69,388
8,486
94,480
17,884
1,490
191,728
Accumulated amortisation and
impairment
At 1 January 2024
60,787
7,355
72,599
9,181
805
150,727
Charge for the year
–
290
5,084
331
685
6,390
Impairment
–
59
3,407
306
–
3,772
Foreign exchange
1,018
1
862
8
–
1,889
At 31 December 2024
61,805
7,705
81,952
9,826
1,490
162,778
Net book value
At 31 December 2024
7,583
781
12,528
8,058
–
28,950
At 31 December 2023
7,399
963
19,063
7,268
685
35,378
Group
Goodwill
£’000
Patents
£’000
Development
costs
£’000
Software
£’000
Customer
contracts
£’000
Total
£’000
Cost
At 1 January 2023
72,128
8,860
92,271
13,882
8,330
195,471
Additions
–
124
2,852
2,643
–
5,619
Acquired through business
combination
204
–
–
–
1,490
1,694
Disposals
–
(651)
–
–
(8,029)
(8,680)
Foreign exchange
(4,146)
(15)
(3,461)
(76)
(301)
(7,999)
At 31 December 2023
68,186
8,318
91,662
16,449
1,490
186,105
Accumulated amortisation and
impairment
At 1 January 2023
64,472
7,852
69,303
8,500
8,330
158,457
Charge for the year
–
167
5,996
720
805
7,688
Disposals
–
(651)
–
–
(8,029)
(8,680)
Foreign exchange
(3,685)
(13)
(2,700)
(39)
(301)
(6,738)
At 31 December 2023
60,787
7,355
72,599
9,181
805
150,727
Net book value
At 31 December 2023
7,399
963
19,063
7,268
685
35,378
At 31 December 2022
7,656
1,008
22,968
5,382
–
37,014
Customer contract intangible assets relate to customer contracts acquired as part of business combinations.
The amortisation charge of £6,390,000 (2023: £7,688,000) has been classified within ‘selling, general and
administrative expenses’ in the Consolidated Income Statement. Development costs include £4,054,000
(2023: £2,992,000) and Software costs include £nil (2023: £6,722,000) of assets not subject to amortisation.
Development cost impairment charges of £3,772,000 incorporate £2,887,000 of charges relating to the impairment
of Dilute Nitride technology development costs where the Group has taken the decision to discontinue the
development and commercialisation of the technology given the current lack of visibility over the timeline to
commercialisation of the technology. The net book value of the assets has been impaired to £nil with the charge
recognised in ‘Impairment loss on intangible assets’ in the Consolidated Income Statement. The remaining charge
of £885,000 relates to the impairment of the Group’s US related wireless CGU assets (see note 13).
144
IQE Annual Report and Accounts 2024
Impairment tests for goodwill
Goodwill is tested for impairment annually and whenever there is an indication of impairment at the level of the CGU
to which it is allocated. Multiple production facilities and production assets are included in a single CGU reflecting
that production can (and is) transferred between sites and production assets for different operating segments to
suit capacity planning and operational efficiency. Given the interdependency of facilities and production assets,
goodwill is tested for impairment by grouping operational sites and production assets into CGUs based on type of
production. Corporate assets are allocated to CGUs in proportion to the utilisation of production assets and facilities
by each CGU.
2024
Cost
£’000
2024
Impairment
£’000
2024
Foreign
exchange
£’000
2024
NBV
£’000
2023
Cost
£’000
2023
Acquired on
business
combination
£’000
2023
Foreign
exchange
£’000
2023
NBV
£’000
Allocation of goodwill by
CGU
Wireless
–
–
–
–
–
–
–
–
Photonics
7,399
–
184
7,583
7,656
204
(461)
7,399
Total Goodwill
7,399
–
184
7,583
7,656
204
(461)
7,399
The recoverable amount of the CGUs has been determined based on value in use calculations, using cash flow
projections for a five-year period plus a terminal value based upon a long-term growth rate of 2% (2023: 2%) in line
with The Bank of England’s and the US Federal Reserve’s monetary policy 2% inflation target.
Value in use calculations are based on the Group’s Board-approved 2025 budget and latest five-year cash flow
forecasts which have been risk adjusted and adjusted to exclude the impact of expansionary capital expenditure
and certain linked earnings and cash flows. The Group has continued to experience weak customer demand and
low customer orders following the global semiconductor industry downturn as market recovery has been slower
than anticipated in key sectors, driven primarily by weak consumer demand in end markets. Revenue assumptions
in year 1 reflect modest mid-single digit percentage year-on-year growth. Revenue assumptions for years 2, 3, 4 and
5 incorporate a combination of market penetration and new business assumptions and business segment growth
that takes account of industry trends and external market research.
Within the 2024 value in use calculations, risk adjustments have been factored directly into the 5-year cashflows. In
2023, this risk adjusted was reflected within the discount rate utilised. The calculation of the recoverable amount of
each CGU in the value in use calculations is sensitive to small changes in the following key assumptions applied in
the 2024 cash flow forecast:
2024
Year 1
%
Year 2
%
Year 3
%
Year 4
%
Year 5
%
5 Year
CAGR
%
Unadjusted discount rate
16.8%
16.8%
16.8%
16.8%
16.8%
N/A
Photonics revenue growth rate
Adjusted Board -
approved forecast*
Adjusted Board -
approved forecast*
15.9%
18.7%
10.8%
9.8%
18.7%
Wireless revenue growth rate
22.8%
23.6%
13.7%
7.6%
9.5%
* Adjusted Board approved forecast relates to the Group’s Board approved 2025 budget and latest five year cash flow forecasts adjusted to
exclude earnings and cash flows associated with expansionary capital expenditure
2023
Year 1
%
Year 2
%
Year 3
%
Year 4
%
Year 5
%
5 Year
CAGR
%
Risk adjusted discount rate
18.5%
18.5%
18.5%
18.5%
18.5%
N/A
Photonics growth rate
Adjusted Board
approved forecast*
Adjusted Board
approved forecast*
8.6%
17.6%
11.9%
20.2%
Wireless growth rate
Adjusted Board
approved forecast*
Adjusted Board
approved forecast*
7.2%
4.8%
4.2%
18.5%
The assumptions and growth rates contained in the Group’s value in use calculations have been updated in 2024.
The updated cashflow forecasts reflect latest industry trends and external market research and a slower market
recovery in key sectors following the industry-wide semiconductor downturn compared to the assumptions
contained in the Group’ prior year value in use calculations. The value in use calculations comprise revenue, material
costs and site manufacturing labour and overhead cost forecasts that have been assessed and updated by
reference to a combination of customer and supplier specific information and a combination of market penetration
and new business assumptions combined with business segment growth rates that take account of industry trends
and external market research market growth assumptions.
Financial Statements
IQE Annual Report and Accounts 2024
145
Notes to the financial statements continued
for the year ended 31 December 2024
13. Intangible assets continued
Photonics CGU
The recoverable amount of the Photonics CGU of £121,751,000, determined based on value in use calculations is
greater than the carrying amount (£121,196,000) of the associated intangible assets, property, plant and equipment,
right-of-use assets and working capital allocated to the CGU such that no impairment of Photonics CGU assets has
been identified.
The Group has carried out a sensitivity analysis on the impairment test for the Photonics CGU, using various
reasonably plausible scenarios focused on changes in business segment growth rates and changes in the discount
rate applied in the value in use calculations.
• Growth rates in the value in use calculations take account of continuing market demand for compound
semiconductors and associated technology advancement, driven by macro trends of 5G and connected devices,
and the increasing proliferation of 3D and advanced sensing end user applications that require enabling
compound semiconductor material. If the aggregated compound annual revenue growth rate used in the value
in use calculations to determine the recoverable amount was to decrease by 1% the magnitude of the adverse
impact on the recoverable amount of Photonics CGU non-current assets would be £8,828,000.
• If the aggregated compound annual revenue growth rate used in the value in use calculations to determine the
recoverable amount was to decrease by 0.1%, this would eliminate all the headroom in the value in use calculation.
• If the discount rate used in the value in use calculations to determine the recoverable amount was to increase by
0.5%, the magnitude of the adverse impact on the recoverable amount of Photonics CGU non-current assets
would be £5,112,000.
• If the discount rate used in the value in use calculations to determine the recoverable amount was to increase by
0.1%, this would eliminate all the headroom in the value in use calculation.
Wireless CGU
The recoverable amount of the Wireless CGU of £88,341,000 determined based on value in use calculations is lower
than the carrying amount (£91,375,000) of the associated intangible assets, property, plant and equipment, right-of-
use assets and working capital allocated to the CGU such that an impairment of Wireless CGU assets has been
identified. The impairment has arisen as a result of weak customer demand and lower customer orders in the
wireless sector as market recovery has been slower than anticipated.
The non-cash impairment loss of £3,066,000 relates to the Group’s US related wireless assets and has been allocated to
the relevant US based intangible and tangible assets which has resulted in a non-cash intangible asset impairment
charge of £885,000 and a non-cash property, plant and equipment impairment charge of £2,181,000.
The Group has carried out a sensitivity analysis on the impairment test for the Wireless CGU, using various
reasonably plausible scenarios focused on changes in business segment growth rates, direct wafer product
margins and changes in the discount rate applied in the value in use calculations.
• Growth rates in the value in use calculations take account of continuing market demand for compound
semiconductors and associated technology advancement, driven by macro trends of 5G and connected devices
where 5G network infrastructure and 5G mobile handsets are being enabled by next generation wireless
compound semiconductor material. If the aggregated compound annual revenue growth rate used in the value
in use calculations to determine the recoverable amount was to decrease by 1% the impact on the impairment
charge would be to increase the charge by £6,606,000.
• If the discount rate used in the value in use calculations to determine the recoverable amount was to increase by
0.5%, the impact on the impairment charge would be to increase the charge by £3,457,000.
146
IQE Annual Report and Accounts 2024
Company
Patents
£’000
Software
£’000
Total
£’000
Cost
At 1 January 2024
7,839
7,643
15,482
Additions
163
1,419
1,582
At 31 December 2024
8,002
9,062
17,064
Accumulated amortisation
At 1 January 2024
6,993
825
7,818
Charge for the year
265
181
446
Impairment
59
–
59
At 31 December 2024
7,317
1,006
8,323
Net book value
At 31 December 2024
685
8,056
8,741
At 31 December 2023
846
6,818
7,664
Company
Patents
£’000
Software
£’000
Total
£’000
Cost
At 1 January 2023
7,715
5,000
12,715
Additions
124
2,643
2,767
At 31 December 2023
7,839
7,643
15,482
Accumulated amortisation
At 1 January 2023
6,782
618
7,400
Charge for the year
211
207
418
At 31 December 2023
6,993
825
7,818
Net book value
At 31 December 2023
846
6,818
7,664
At 31 December 2022
933
4,382
5,315
Financial Statements
IQE Annual Report and Accounts 2024
147
Notes to the financial statements continued
for the year ended 31 December 2024
14. Property, plant and equipment
Group
Land and
buildings
£’000
Short leasehold
improvements
£’000
Fixtures
and fittings
£’000
Plant and
machinery
£’000
Total
£’000
Cost
At 1 January 2024
13,364
37,888
16,681
212,572
280,505
Additions
–
58
73
7,765
7,896
Disposals
–
(4,650)
(1,203)
(31,292)
(37,145)
Transfer to assets held for resale
–
–
–
(939)
(939)
Foreign exchange
(270)
776
(532)
(64)
(90)
At 31 December 2024
13,094
34,072
15,019
188,042
250,227
Accumulated depreciation
At 1 January 2024
5,705
23,388
8,161
113,698
150,952
Charge for the year
707
3,474
933
11,438
16,552
Disposals
–
(4,650)
(1,203)
(29,427)
(35,280)
Impairment
–
916
–
3,699
4,615
Transfer to assets held for resale
–
–
–
(819)
(819)
Foreign exchange
(67)
538
(159)
221
533
At 31 December 2024
6,345
23,666
7,732
98,810
136,553
Net book value
At 31 December 2024
6,749
10,406
7,287
89,232
113,674
At 31 December 2023
7,659
14,500
8,520
98,874
129,553
Property, plant and equipment includes assets in the course of construction with a net carrying value of £7,831,000
(2023: £28,983,000).
Group
Land and
buildings
£’000
Short leasehold
improvements
£’000
Fixtures
and fittings
£’000
Plant and
machinery
£’000
Total
£’000
Cost
At 1 January 2023
18,916
35,550
15,705
210,513
280,684
Additions
–
3,534
1,876
13,812
19,222
Acquired through business combination
–
–
37
3,493
3,530
Transfer to assets held for resale
(5,086)
–
–
–
(5,086)
Other transfers
–
672
–
(3,355)
(2,683)
Disposals
–
–
(174)
(2,722)
(2,896)
Foreign exchange
(466)
(1,868)
(763)
(9,169)
(12,266)
At 31 December 2023
13,364
37,888
16,681
212,572
280,505
Accumulated depreciation
At 1 January 2023
7,720
21,408
7,712
116,789
153,629
Charge for the year
941
2,997
940
8,308
13,186
Transfer to assets held for resale
(2,812)
–
–
–
(2,812)
Other transfers
–
–
–
(3,191)
(3,191)
Disposals
–
–
(174)
(2,321)
(2,495)
Foreign exchange
(144)
(1,017)
(317)
(5,887)
(7,365)
At 31 December 2023
5,705
23,388
8,161
113,698
150,952
Net book value
At 31 December 2023
7,659
14,500
8,520
98,874
129,553
At 31 December 2022
11,196
14,142
7,993
93,724
127,055
148
IQE Annual Report and Accounts 2024
Other transfers relate to a reclassification of inventory to tangible fixed assets of £nil (2023: £508,000) and
reclassifications between cost and accumulated depreciation totalling £nil (2023: £3,191,000) within short leasehold
improvements and plant and machinery. The reclassifications had no impact on net assets, loss after tax or total
cash flow for 2023.
Property, plant and machinery impairment charges of £4,615,000 incorporates £2,434,000 relating to the impairment
of certain specific redundant plant and machinery assets linked to the restructuring of the Group’s US operations.
The net book value of the assets has been impaired to £nil with the charge recognised in ‘Impairment loss on
property, plant and equipment’ in the Consolidated Income Statement. The remaining charge of £2,181,000 relates to
the impairment of the Group’s US related wireless CGU assets (see note 13).
Company
Fixtures
and fittings
£’000
Cost
At 1 January 2024
190
Additions
1
Disposals
(2)
At 31 December 2024
189
Accumulated depreciation
At 1 January 2024
173
Charge for the year
11
Disposals
–
At 31 December 2024
184
Net book value
At 31 December 2024
5
At 31 December 2023
17
Company
Fixtures
and fittings
£’000
Cost
At 1 January 2023
538
Additions
3
Disposals
(351)
At 31 December 2023
190
Accumulated depreciation
At 1 January 2023
149
Charge for the year
24
Disposal
–
At 31 December 2023
173
Net book value
At 31 December 2023
17
At 31 December 2022
389
Financial Statements
IQE Annual Report and Accounts 2024
149
Notes to the financial statements continued
for the year ended 31 December 2024
15. Right-of-use assets
Group
Land and
buildings
£’000
Fixtures and
Fittings
£’000
Plant and
machinery
£’000
Total
£’000
Cost
At 1 January 2024
54,978
81
735
55,794
Modifications/remeasurements
7,256
3
493
7,752
Foreign exchange
460
3
10
473
At 31 December 2024
62,694
87
1,238
64,019
Accumulated depreciation
At 1 January 2024
17,188
17
694
17,899
Charge for the year
3,627
18
146
3,791
Impairment
31
–
–
31
Foreign exchange
87
1
–
88
At 31 December 2024
20,933
36
840
21,809
Net book value
At 31 December 2024
41,761
51
398
42,210
At 31 December 2023
37,790
64
41
37,895
Group
Land and
buildings
£’000
Fixtures and
Fittings
£’000
Plant and
machinery
£’000
Total
£’000
Cost
At 1 January 2023
55,064
26
782
55,872
Additions
798
62
–
860
Disposals
–
(4)
–
(4)
Foreign exchange
(884)
(3)
(47)
(934)
At 31 December 2023
54,978
81
735
55,794
Accumulated depreciation
At 1 January 2023
13,856
12
572
14,440
Charge for the year
3,620
10
160
3,790
Disposals
–
(4)
–
(4)
Foreign exchange
(288)
(1)
(38)
(327)
At 31 December 2023
17,188
17
694
17,899
Net book value
At 31 December 2023
37,790
64
41
37,895
At 31 December 2022
41,208
14
210
41,432
Modifications and remeasurements during the year primarily relate to adjustments in lease payments and lease
term extensions. The total impact on right-of-use assets was £7,752,000 (2023: £nil) with corresponding changes in
lease liabilities.
150
IQE Annual Report and Accounts 2024
16. Investments
Company
Investments in
subsidiaries
£’000
Total
£’000
Cost
At 1 January 2024
126,006
126,006
Subsidiaries share-based payments charge
2,348
2,348
At 31 December 2024
128,354
128,354
Provisions for impairment
At 1 January 2024
65,837
65,837
Impairment
506
506
Reversal of impairment
(18,597)
(18,597)
At 31 December 2024
47,746
47,746
Net book value
At 31 December 2024
80,608
80,608
At 31 December 2023
60,169
60,169
Company
Investments in
subsidiaries
£’000
Total
£’000
Cost
At 1 January 2023
124,458
124,458
Subsidiaries share-based payments charge
1,548
1,548
At 31 December 2023
126,006
126,006
Provisions for impairment
At 1 January 2023
48,210
48,210
Impairment charge
17,627
17,627
At 31 December 2023
65,837
65,837
Net book value
At 31 December 2023
60,169
60,169
At 31 December 2022
76,248
76,248
Details of the Company’s subsidiaries are set out in note 30.
Investments are reviewed for impairment trigger events annually. This review includes a qualitative assessment of
the business performance of each investment and a quantitative assessment of any potential impact on the
carrying value of each investment arising from the results of the Group’s value in use calculations prepared as part
of the Group’s goodwill impairment review.
The Group’s value in use calculations prepared as part of the Group’s goodwill impairment review has identified an
impairment reversal for the Company’s investment in its sub-group headed by Wafer Technology International
Limited and an impairment trigger event for the Company’s investment in its sub-group headed by EPI Holdings
Limited.
A reversal of impairment has been recognised for the Company’s investment in its sub-group, headed by Wafer
Technology International Limited. The impairment was originally recognised following a decline in forecast future
profitability of the business, a position that has changed in the current year where improvement in forecasted future
profitability, assessed by reference to the Group’s 2024 value in use cash flow forecasts has resulted in a £18,597,000
(2023: £15,239,000 impairment charge) reversal of impairment in the Company’s investment in its Wafer Technology
sub-group.
An impairment trigger event was identified for the Company’s investment in its sub-group, headed by EPI Holdings
Limited, primarily as a result of a forecast decline in future profitability of the subsidiary, IQE (Europe) Limited, linked to
the Group’s restructuring activity and the decision to commence the consolidation of its South Wales activities into
its Newport site. The decline in forecast future profitability, assessed by reference to the Group’s 2024 value in use
cash flow forecasts resulted in an impairment of £506,000 (2023: £2,388,000) of the investment in the EPI Holdings
sub-group.
Financial Statements
IQE Annual Report and Accounts 2024
151
Notes to the financial statements continued
for the year ended 31 December 2024
17. Inventories
Group
2024
£’000
2023
£’000
Raw materials and consumables
13,228
17,796
Work-in-progress and finished goods
6,781
6,781
20,009
24,577
The Directors are of the opinion that the replacement values of inventories are not materially different to the carrying
values stated above. The carrying values are stated net of impairment provisions of £11,270,000 (2023: £13,638,000).
£391,000 (2023: £522,000) of inventories were written down during 2024 and an expense recognised in the income
statement.
18. Trade and other receivables
Current
2024
Group
£’000
2024
Company
£’000
2023
Group
£’000
2023
Company
£’000
Trade receivables
19,567
–
15,421
–
Other receivables
1,420
701
2,894
121
Contract assets
14,061
–
16,349
–
Prepayments
2,376
935
3,556
2,096
37,424
1,636
38,220
2,217
Non-current
2024
Group
£’000
2024
Company
£’000
2023
Group
£’000
2023
Company
£’000
Amounts owed by Group undertakings
–
118,032
–
165,422
–
118,032
–
165,422
Contract assets relate to bespoke manufactured customer products where the Group has a guaranteed
contractual right of payment. Contract assets are transferred to receivables at the point that manufactured
products are delivered to customers, except for supplier managed inventory arrangements where contract assets
are transferred to receivables from the earlier of a specified contractual date following delivery or when the product
is drawn from inventory by the customer. All contract assets from 2023, excluding a balance of £431,000, have been
transferred to receivables during 2024.
Other receivables include £1,146,000 (2023: £1,074,000) of tax receivables.
Amounts owed by Group undertakings are unsecured and repayable on demand but expected to be paid in over 12
months. Interest is charged at a rate of 5% per annum (2023: 5% per annum).
The estimated fair values of trade receivables, other receivables, contract assets and amounts owed by Group
undertakings are set out in note 23.
19. Assets held for resale
Current
2024
Group
£’000
2024
Company
£’000
2023
Group
£’000
2023
Company
£’000
Property, plant and equipment held for resale
120
–
2,274
–
120
–
2,274
–
Assets held for resale at 31 December 2024 relate to certain specific plant and machinery where the Group has
entered into a commitment to sell the plant and machinery as part of the restructuring of its US operations.
Manufacturing activity at the Group’s Pennsylvania site ceased in 2023 with a committed management plan to sell
the site and associated freehold property following completion of all site decommissioning activities. The freehold
property was held as an asset held for resale in 2023 and was sold in 2024 for net proceeds of £4,062,000.
152
IQE Annual Report and Accounts 2024
20. Trade and other payables
Current
2024
Group
£’000
2024
Company
£’000
2023
Group
£’000
2023
Company
£’000
Trade payables
8,659
562
15,243
1,306
Amounts owed by Group undertakings
–
28,507
–
24,068
Other taxation and social security
500
1,310
377
70
Other payables
9,249
6,667
11,137
3,195
Accruals and deferred income
15,825
2,991
15,750
8,554
Deferred consideration
172
–
65
–
34,405
40,037
42,572
37,193
Accruals and deferred income include contract liabilities of £2,088,000 (2023: £618,000). Contract liabilities relate to
advance payments received from customers for services/products expected to be delivered in the next 12 months.
All contract liabilities from 2023 have been recognised as revenue during 2024.
Amounts owed to group undertakings are unsecured and repayable on demand. Interest is charged at a rate of 5%
per annum (2023: 5% per annum).
Non-Current
2024
Group
£’000
2024
Company
£’000
2023
Group
£’000
2023
Company
£’000
Deferred consideration
2,035
–
2,208
–
2,035
–
2,208
–
Deferred consideration of £2,207,000 (2023: £2,273,000) is payable to Cardiff University in relation to the acquisition of
CSC in instalments over a period up to 1 January 2029.
21. Borrowings
2024
Group
£’000
2024
Company
£’000
2023
Group
£’000
2023
Company
£’000
Non-current borrowings
Bank borrowings
23,460
23,460
3,692
3,692
Lease liabilities
44,872
–
40,435
–
68,332
23,460
44,127
3,692
Current borrowings
Bank borrowings
–
–
4,153
857
Lease liabilities
5,658
–
5,865
–
5,658
–
10,018
857
Total borrowings
73,990
23,460
54,145
4,549
Bank Borrowings
2024
Group
£’000
2024
Company
£’000
2023
Group
£’000
2023
Company
£’000
Bank borrowings fall due for repayment as follows
Within one year
–
–
4,153
857
Between one and five years
23,460
23,460
3,692
3,692
23,460
23,460
7,845
4,549
On 17 May 2023, the Company refinanced its £28,000,000 ($35,000,000) multi-currency revolving credit facility,
provided by HSBC Bank plc. The refinancing has been treated as a debt modification. The facility is secured on the
assets of IQE plc and its subsidiary companies with a committed term to 1 May 2026. Interest on the facility is
payable at a margin of between 2.50 and 3.50% per annum over SONIA on any drawn balances and the facility was
subject to quarterly leverage and Interest cover covenant tests up until 10 March 2025 when the Group negotiated a
Deed of Amendment and Restatement to the facility which replaced the leverage and interest cover financial
covenants with minimum adjusted EBITDA and minimum liquidity covenants.
The Group obtained a formal waiver pre-year end of its 31 December 2024 covenant tests from HSBC Bank plc. The
Group has complied with all the financial covenants of its borrowing facilities during 2024 and 2023.
Financial Statements
IQE Annual Report and Accounts 2024
153
Notes to the financial statements continued
for the year ended 31 December 2024
21. Borrowings continued
Lease liabilities
2024
£’000
2023
£’000
Lease liabilities fall due for repayment as follows
Within one year
5,658
5,865
Between one and five years
32,054
36,007
After five years
12,818
4,428
50,530
46,300
Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements
revert to the lessor in the event of default. Lease liabilities principally relate to property.
22. Provisions for other liabilities and charges
Group
Restructuring
£’000
Onerous
Contract
£’000
Warranty
Provision
£’000
Dilapidation
£’000
2024
Total
£’000
Restructuring
£’000
Onerous
Contract
£’000
Warranty
Provision
£’000
Other
£’000
2023
Total
£’000
As at 1 January
1,650
866
1,153
–
3,669
1,252
1,332
898
150
3,632
Charged to the
income statement
51
–
223
245
519
1,132
–
467
–
1,599
Utilised during the year
(1,675)
(394)
(830)
–
(2,899)
(735)
(413)
(164)
(150)
(1,462)
Foreign exchange
–
8
2
6
16
1
(53)
(48)
–
(100)
As at 31 December
26
480
548
251
1,305
1,650
866
1,153
–
3,669
Group
Restructuring
£’000
Onerous
Contract
£’000
Warranty
Provision
£’000
Dilapidation
£’000
2024
Total
£’000
Restructuring
£’000
Onerous
Contract
£’000
Warranty
Provision
£’000
Other
£’000
2023
Total
£’000
Current
26
200
548
–
774
1,650
195
1,153
–
2,998
Non-current
–
280
–
251
531
–
671
–
–
671
Total
26
480
548
251
1,305
1,650
866
1,153
–
3,669
The restructuring provision relates to costs relating to the announced closure of the Group’s manufacturing facility in
Pennsylvania, USA and the Group’s manufacturing facility in Singapore.
• The restructuring provision of £26,000 (2023: £1,608,000) associated with the closure of the Group’s manufacturing
facility in the USA relates to site closure costs that are expected to be utilised over a period up to 31 March 2025.
• The restructuring provision of £nil (2023: £42,000) associated with the closure of the Group’s manufacturing facility
in Singapore relates to site closure costs.
The onerous contract provision represents the cost of minimum guaranteed future royalty payments associated
with cREO™ technology acquired from Translucent Inc that is no longer being commercialised. The onerous contract
provision is expected to be utilised over a period up to 28 February 2027.
The warranty provision relates to the costs of expected returns under warranty that are expected to be utilised over
a period up to 30 June 2025.
The dilapidation provision relates to the estimated costs to fulfil property lease obligations upon expiry of the
relevant property lease contract.
154
IQE Annual Report and Accounts 2024
Company
Onerous
Contract
£’000
2024
£’000
Onerous
Contract
£’000
Other
£’000
2023
£’000
As at 1 January
866
866
1,332
150
1,482
Charged to the income statement
–
–
–
–
–
Utilised during the year
(394)
(394)
(413)
(150)
(563)
Foreign exchange
8
8
(53)
–
(53)
As at 31 December
480
480
866
–
866
Company
2024
£’000
2023
£’000
Current
200
195
Non-current
280
671
As at 31 December
480
866
The onerous contract provision represents the cost of minimum guaranteed future royalty payments associated
with the cREO™ technology acquired from Translucent Inc. The onerous contract provision is expected to be utilised
over a period up to 28 February 2027.
23. Financial Instruments
Financial instruments by category
Trade and other receivables (excluding prepayments) and cash and cash equivalents are classified as financial
assets at amortised cost. Borrowings and trade and other payables are classified as financial liabilities at amortised
cost. Both categories are initially measured at fair value and subsequently held at amortised cost. Financial
instruments are classified as level 2 per the fair value hierarchy.
Derivatives (forward exchange contracts) are classified as derivatives used for hedging and accounted for at fair
value through profit and loss in the consolidated statement of comprehensive income.
Financial risk and treasury policies
The Group’s finance team maintains liquidity, manages relations with the Group’s bankers, identifies and manages
foreign exchange risk and provides a treasury service to the Group’s businesses. Treasury dealings such as
investments, borrowings and foreign exchange are conducted only to support underlying business transactions. The
Group has clearly defined policies for the management of foreign exchange rate risk. The Group finance team does
not undertake speculative foreign exchange dealings for which there is no underlying exposure. Exposures resulting
from sales and purchases in foreign currency are matched where possible and the net exposure may be hedged
by the use of forward exchange contracts.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the Group’s receivables and contract assets due from
customers, and monies on deposit with financial institutions.
Customer credit risk is managed at the Group and site level with credit risk assessments completed for all
customers. If no independent credit rating is available, the credit quality of the customer is assessed by reference to
the customers’ financial position, past experience and other relevant factors. Individual credit limits are set based on
internal or external ratings in accordance with the Group’s credit risk policies. Where the Group assesses a potential
credit risk, this is dealt with either by up-front payment prior to the shipment of goods or by other credit risk
mitigation measures.
Counterparty risk associated with monies on deposit with financial institutions is managed at the Group level in
accordance with the Group’s treasury policies. The credit quality of banks has been assessed by reference to
external credit ratings, based on reputable credit agencies’ long-term issuer ratings.
Trade receivables and contract assets
The credit quality of trade receivables and contract assets that are not impaired have been assessed based on
historical information about the counterparty default rate.
Financial Statements
IQE Annual Report and Accounts 2024
155
Notes to the financial statements continued
for the year ended 31 December 2024
23. Financial Instruments continued
Cash at bank
The credit quality of cash has been assessed by reference to external credit ratings based on reputable credit
agencies’ long-term issuer ratings. The Group has cash at bank balances totalling £4,660,000 (2023: £5,617,000) all
held with banks with A1 credit ratings.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial asset as
set out below. In terms of trade receivables, the terms of sale provide that the Group has recourse to the products
sold in the event of non-payment by a customer.
Assets as per balance sheet
2024
Group
£’000
2024
Company
£’000
2023
Group
£’000
2023
Company
£’000
Carrying amount
Cash and cash equivalents
4,660
306
5,617
–
Trade receivables
19,567
–
15,421
–
Amounts owed by Group undertakings
–
118,032
–
165,422
Other receivables excluding prepayments
15,481
701
19,243
121
39,708
119,039
40,281
165,543
Included in other receivables are contract assets of £14,061,000 (2023: £16,396,000).
The Group is exposed to credit concentration risk with its two (2023: two) largest customers which represent 32%
(2023: 32%) of outstanding trade receivables and contract asset balances. Customer credit risk is managed
according to strict credit control policies. The majority of the Group’s revenues are derived from large multinational
organisations that are established customers of the Group with no prior history of default. Events of default have
been limited and when incurred principally relate to smaller independent customers. The Group monitors customer
credit ratings and has experienced low levels of defaults in the past.
Group
Gross
2024
£’000
Provision
2024
£’000
Net
2024
£’000
Gross
2023
£’000
Provision
2023
£’000
Net
2023
£’000
Not past due
16,217
–
16,217
11,319
–
11,319
Past due 0-30
3,220
–
3,220
3,202
–
3,202
Past due more than 30
225
(95)
130
2,065
(800)
1,265
19,662
(95)
19,567
16,586
(800)
15,786
Allowance for bad and doubtful debt
2024
£’000
2023
£’000
At 1 January
800
2,713
(Credited)/charged to the income statement
3
(1,808)
Utilised during the year
(709)
–
Foreign exchange
1
(105)
As at 31 December
95
800
As at 31 December 2024, 82% (2023: 68%) of trade receivables were within terms. Of the other trade receivables, 93%
(2023: 61%) were less than 30 days past due. An allowance has been made for estimated irrecoverable amounts
from the sale of goods of £95,000 (2023: £800,000). This allowance has been determined on an expected credit loss
basis by reference to past default experience.
The carrying values of trade and other receivables also represent their estimated fair values. Trade receivables and
contract assets are primarily denominated in US dollars, as are trade payables limiting the exposure of the Group to
movements in foreign exchange rates. Based on the balances held at 31 December 2024, a one cent movement in
the US dollar to Sterling rate would impact the net value of these instruments by £193,000 (2023: £115,000).
156
IQE Annual Report and Accounts 2024
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group
manages its funding to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the
Group’s reputation.
The Group uses cash flow forecasts to monitor cash requirements and to optimise its borrowing position. The Group
ensures that it has sufficient borrowing facilities to meet foreseeable operational expenses. At the year end the
Group had available undrawn facilities of £4,400,000 (2023: £28,363,000).
The following table illustrates the contractual maturities of financial liabilities, including interest payments where
applicable, and excluding the impact of netting agreements on an undiscounted basis.
Contractual cash flow maturities –
Other financial liabilities at amortised cost
31 December 2024
Group
Carrying
amount
£’000
Group
Contractual
Cash flows
£’000
Group
Less than
12 months
£’000
Group
1 –2 Years
£’000
Group
2–5 Years
£’000
Group
5+ Years
£’000
Trade and other payables
19,943
20,460
18,086
505
1,869
–
Accruals
13,737
13,737
13,737
–
–
–
Bank borrowings
23,460
23,600
–
23,600
–
–
Lease liabilities
50,530
67,452
7,550
6,538
32,147
21,217
107,670
125,249
39,373
30,643
34,016
21,217
Contractual cash flow maturities –
Other financial liabilities at amortised cost
31 December 2023
Group
Carrying
amount
£’000
Group
Contractual
Cash flows
£’000
Group
Less than
12 months
£’000
Group
1 –2 Years
£’000
Group
2–5 Years
£’000
Group
5+ Years
£’000
Trade and other payables
28,653
29,294
26,570
350
1,813
561
Accruals
15,750
15,750
15,750
–
–
–
Bank borrowings
7,845
8,214
4,277
–
3,937
–
Lease liabilities
46,300
50,882
6,115
5,998
34,728
4,041
98,548
104,140
52,712
6,348
40,478
4,602
Contractual cash flow maturities –
Other financial liabilities at amortised cost
31 December 2024
Company
Carrying
amount
£’000
Company
Contractual
Cash flows
£’000
Company
Less than
12 months
£’000
Company
1 –2 Years
£’000
Company
2–5 Years
£’000
Company
5+ Years
£’000
Trade and other payables
7,229
7,229
7,229
–
–
–
Amounts owed to Group undertakings
28,507
28,507
28,507
–
–
–
Bank borrowings
23,460
23,600
–
23,600
–
–
Accruals
2,991
2,991
2,991
–
–
–
62,187
62,327
38,727
23,600
–
–
Contractual cash flow maturities –
Other financial liabilities at amortised cost
31 December 2023
Company
Carrying
amount
£’000
Company
Contractual
Cash flows
£’000
Company
Less than
12 months
£’000
Company
1 –2 Years
£’000
Company
2–5 Years
£’000
Company
5+ Years
£’000
Trade and other payables
4,501
4,501
4,501
–
–
–
Amounts owed to Group undertakings
24,068
24,068
24,068
–
–
–
Bank borrowings
3,692
3,937
–
3,937
–
–
Accruals
8,554
8,554
8,554
–
–
–
40,815
41,060
37,123
3,937
–
–
Financial Statements
IQE Annual Report and Accounts 2024
157
Notes to the financial statements continued
for the year ended 31 December 2024
23. Financial Instruments continued
Financial risk management
Market risk – Foreign Exchange Risk
The Group operates internationally with operations in the United Kingdom, United States of America and Taiwan, and
is exposed to foreign exchange risk arising from various currency exposures, primarily relating to fluctuations in
exchange rates between UK sterling, US dollars and Taiwanese dollars. The Group’s presentational currency is
sterling and foreign exchange risk arises from a combination of future commercial transactions, recognised assets
and liabilities denominated in a currency that is not the functional currency of the relevant group entity and net
investments in the Group’s foreign operations.
The majority of the Group’s sales are denominated in US dollars and therefore the Group’s cash flows are affected
by fluctuations in the rate of exchange between US dollar and UK Sterling and Taiwanese dollar exchange rates
given that the Group is required to fund certain costs at its operations in the United Kingdom and Taiwan in local
currencies. Foreign exchange risk of this nature is managed using a combination of the natural currency hedge
within the Group’s operating model given that a significant proportion of the Group’s costs, including the purchase
of certain key raw materials, are denominated in US dollars, and via the use of derivative foreign currency forward
exchange contracts.
Derivative foreign currency forward exchange contracts are only used for economic hedging purposes and not as
speculative investments. Derivative foreign currency forward exchange contracts that do not meet the hedge
accounting criteria are classified as ‘held for trading’ for accounting purposes and are accounted for at fair value
through profit or loss. These derivative instruments are presented as current assets or liabilities to the extent they
are expected to be settled within 12 months after the end of the reporting period. As at 31 December 2024, the fair
value of foreign currency forward exchange contracts held for trading was £nil (2023: £nil). The foreign currency
forward exchange contracts are classified as Level 2 financial instruments. The fair value of Level 2 financial
instruments has been determined using observable market data based on quoted market prices or market quotes
for similar instruments. If all significant inputs required to fair value the instrument are observable, the instrument is
included in level 2. The Group’s accounting policy for its cash flow hedges is set out in note 2.18.
The Group has certain investments in foreign operations in North America and Taiwan, whose net assets are
exposed to foreign currency translation risk. Translation exposures that arise on converting the results of overseas
subsidiaries are not hedged fully. As a guide to the sensitivity of the Group’s results to movements in foreign currency
exchange rates, a one cent movement in the US dollar to Sterling rate would impact annual earnings by
approximately £69,000 (2023: £161,000).
Cash flow and fair value interest rate risk
The Board is aware of the risks associated with changes in interest rates and does not speculate on future changes
in interest rates. Historically, the Group has not undertaken any hedging activity in this area, although the Board
keeps this under regular review.
The Group’s interest rate risk arises from its cash and cash equivalents and from its bank borrowings. Cash and cash
equivalents, including foreign currency cash deposits, earn interest at prevailing variable market rates of interest.
The Group’s bank borrowings consist of a variable rate multi-currency revolving credit facility secured against the
assets of the Group.
The variable rate US dollar $35,000,000 (£28,000,000) multi-currency revolving credit facility, which is £23,600,000
($29,500,000) (2023: £3,937,000 ($5,047,000)) utilised at 31 December 2024, has a committed term to 1 May 2026.
Interest on the facility is payable at a margin of between 2.50 and 3.50% per annum over SONIA.
The Group’s policy is to regularly review its exposure to interest rate risk, and in particular the mix between fixed and
floating rate financial assets and financial liabilities. The percentage of financial assets and financial liabilities
bearing variable rate interest was 0% (2023: 0%) and 53% (2023: 21%) respectively.
As a guide to the sensitivity of the Group’s results to movements in interest rates, a 50-basis point (0.5%) movement
in interest rates on the interest-bearing financial assets held at 31 December 2024, would impact annual interest
income by approximately £nil (2023: £nil). A 50-basis point (0.5%) movement in interest rates on the interest-bearing
liabilities held at 31 December 2024 would impact annual interest costs by approximately £117,000 (2023: £39,000).
158
IQE Annual Report and Accounts 2024
Capital risk management
The Group’s main objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and adjusts it in
the light of changes in economic conditions and the characteristic of the underlying assets. The Group monitors
capital by reviewing net debt against shareholders’ funds. The position of these indicators and the movement
during the year is shown in the Five-Year Financial Summary.
The Group defines total capital as equity in the consolidated balance sheet plus net debt or less net funds. Total
capital at 31 December 2024 was £203,440,000 (2023: £218,313,000). The Group monitors capital on the basis of a
gearing ratio. The gearing ratio is calculated as net debt divided by total capital and at 31 December 2024 was 34.1%
(2023: 22.2%).
The Group obtained formal waiver pre-year end from HSBC Bank plc of its 31 December 2024 covenant tests. All
covenants in relation to the Group’s borrowing facilities have been complied with during the year.
Fair values
Fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as
follows:
Group
2024
Carrying
amount
£’000
2024
Fair
value
£’000
2023
Carrying
amount
£’000
2023
Fair
value
£’000
Cash and cash equivalents
4,660
4,660
5,617
5,617
Trade receivables
19,567
19,567
15,421
15,421
Other receivables
1,420
1,420
2,894
2,894
Contract assets
14,061
14,061
16,349
16,349
Trade and other payables
(19,943)
(19,943)
(28,653)
(28,653)
Bank borrowings
(23,460)
(23,460)
(7,845)
(7,845)
(3,695)
(3,695)
3,783
3,783
Company
2024
Carrying
amount
£’000
2024
Fair
value
£’000
2023
Carrying
amount
£’000
2023
Fair
value
£’000
Cash and cash equivalents
306
306
–
–
Amounts owed by Group undertakings
118,032
118,032
165,422
165,422
Other receivables
701
701
121
121
Amounts owed to Group undertakings
(28,507)
(28,507)
(24,068)
(24,068)
Trade and other payables
(7,229)
(7,229)
(4,501)
(4,501)
83,303
83,303
136,974
136,974
Financial Statements
IQE Annual Report and Accounts 2024
159
Notes to the financial statements continued
for the year ended 31 December 2024
23. Financial Instruments continued
Basis for determining fair value
The following summarises the significant methods and assumptions used in estimating the fair values of financial
instruments reflected in the prior table:
Cash and cash equivalents
Cash and cash equivalents earn interest at prevailing variable market rates of interest such that the carrying value
of cash and cash equivalents is deemed to reflect fair value.
Trade receivables, other receivables and contract assets
Trade receivables, other receivables and contract assets are short-term assets with a remaining life of less than one
year such that the amortised cost carrying value of the assets is deemed to reflect fair value.
Amounts owed by Group undertakings
Amounts owed by group undertakings are long-term assets with a remaining life of greater than one year with
outstanding balances accruing interest at a rate of 5% per annum such that the amortised cost carrying value of
the assets is deemed to reflect fair value.
Trade and other payables
Trade and other payables are short-term liabilities with a remaining life of less than one year such that the
amortised cost carrying value of the liabilities is deemed to reflect fair value.
Bank borrowings
The carrying value of bank borrowings is deemed to reflect fair value as interest payable on bank borrowings is
charged at a variable rate assessed as close to current market rates.
Derivative financial instruments
The fair value of derivative foreign currency forward exchange contracts was determined using observable market
data based on quoted market prices or market quotes for similar instruments.
160
IQE Annual Report and Accounts 2024
24. Share capital
Group and Company
2024
Number
of shares
2024
£’000
2023
Number
of shares
2023
£’000
Allotted, called up and fully paid
Ordinary shares of 1p each
967,251,117
9,672
961,518,692
9,615
The movement in the number of ordinary shares during the year was:
2024
Number
2023
Number
At 1 January
961,518,692
804,841,965
Employee share schemes
5,732,425
1,183,997
Placing
–
150,000,000
Retail offer
–
5,492,730
At 31 December
967,251,117
961,518,692
5,732,425 ordinary shares (2023: 156,676,727 ordinary shares) were issued during the year as follows:
2024
Number
of shares
2024
Consideration
2023
Number
of shares
2023
Consideration
Employee share schemes
5,732,425
1.0p-23.0p
1,183,997
1.0p-23.0p
Placing
–
–
150,000,000
20.0p
Retail offer
–
–
5,492,730
20.0p
5,732,425
156,676,727
The share premium arising from consideration received from employee share scheme exercises was £128,000 (2023:
£129,000).
On 17 May 2023, IQE plc raised funds by way of a Placing and a Retail Offer to all existing shareholders. In each case
these were offered at an issue price of 20 pence per share (the ‘Issue Price’). The Placing utilised a cashbox structure
and therefore the premium on the ordinary shares and associated costs, in accordance with Section 612 of the
Companies Act 2006, were initially recognised within the merger reserve (incorporated within ‘Other reserves’). The
investment in the newly incorporated subsidiary utilised within the cashbox structure was dissolved in the prior
period and the merger reserve was subsequently transferred into retained earnings as it was determined to be
distributable in accordance with the Companies Act 2006. The Placing and Retail Offer raised net funds of
£29,708,000 from the issue of 155,492,730 ordinary shares.
25. Share-based payments
The total amount charged to the income statement in 2024 in respect of share-based payments was £3,174,000
(2023: £2,565,000).
Long-term incentive plan
The IQE Plc Share Option Scheme was adopted on 26 May 2000 and amended by shareholders at the Annual
General Meeting on 17 May 2002. Under the scheme, the Remuneration Committee can grant long-term incentive
awards over shares in the Company to Directors and employees of the Group.
Long-term incentive share awards are granted with contractual lives of between three and ten years with a fixed
exercise price of one penny, equal to the nominal value of the ordinary share.
Directors
Long-term incentive awards become exercisable between three and ten years from the date of grant subject to
continued employment and achievement of performance conditions relating to growth in earnings per share and
total shareholder return targets over a three-year vesting period that cannot be extended. The Group has no legal
or constructive obligation to repurchase or settle the options in cash.
Details of the Directors’ long-term incentive plan are set out in the Remuneration Report.
Financial Statements
IQE Annual Report and Accounts 2024
161
Notes to the financial statements continued
for the year ended 31 December 2024
25. Share-based payments continued
Employees
Long-term incentive awards become exercisable between one and ten years from the date of grant, subject to
continued employment.
The Group has no legal or constructive obligation to repurchase or settle the options in cash.
Long-term incentive awards are valued using either the Black-Scholes option-pricing model or the Monte Carlo
simulation model with the total fair value of the award that is to be expensed charged to the income statement over
the vesting period of the long-term incentive award.
Share option scheme
The IQE Plc Share Option Scheme was adopted on 26 May 2000 and amended by shareholders at the Annual
General Meeting on 17 May 2002. Under the scheme, the Remuneration Committee can grant options over shares in
the Company to employees of the Group.
Options are granted with a contractual life of ten years and with a fixed exercise price equal to either the market
value of the shares under option at the date of grant or 1p. Options become exercisable between one and ten years
from the date of grant, subject to continued employment and for awards prior to 2022 the achievement of
performance conditions, including growth in adjusted EBITDA and earnings per share against various targets. The
Group has no legal or constructive obligation to repurchase or settle the options in cash.
Share options are valued using the Black-Scholes option-pricing model with the total fair value of the award that is
to be expensed charged to the income statement over the vesting period of the share option.
The principal assumptions used in the calculation of the fair value of long-term incentive awards and share option
awards are as follows:
Principal assumptions
2024
2023
Weighted average share price at grant date
27.34
31.85
Weighted average exercise price
1.76
2.33
Weighted average vesting period (years)
2
2
Option life (years)
10
10
Weighted average expected life (years)
2
2
Weighted average expected volatility factor
66
68
Weighted average risk-free rate
3.8%
3.2%
Dividend yield
0%
0%
The expected volatility factor is based on historical share price volatility over the three years immediately preceding
the grant of the option. The expected life is the average expected period to exercise. The risk-free rate of return is the
yield of zero-coupon UK government bonds of a term consistent with the assumed option life.
Non-market performance conditions are incorporated into the calculation of fair value by estimating the proportion
of share options that will vest and be exercised based on a combination of historical trends and future expected
trading performance. These are reassessed at the end of each period for each tranche of unvested options.
The fair value of long-term incentive awards and share options granted during the year ended 31 December 2024
was £3,280,000 (2023: £3,821,000).
The weighted average fair value of long-term incentive awards granted during the year ended 31 December 2024
was 23.3p (2023: 17.1p).
The weighted average contractual life of outstanding share options at the year end was 6 (2023: 6) years.
162
IQE Annual Report and Accounts 2024
The movements on long-term incentive awards and share options during the year were as follows:
2024
Number
of options
2024
Average
exercise price
(pence)
2023
Number
of options
2023
Average
exercise price
(pence)
At 1 January
38,669,816
2.33
28,970,530
4.41p
Granted
19,377,226
1.00
22,427,892
1.00p
Exercised
(5,697,425)
3.17
(1,183,997)
11.88p
Cancelled/lapsed
(21,762,832)
1.74
(11,544,609)
3.97p
At 31 December
30,586,785
1.76
38,669,816
2.33p
The weighted average share price at the date share options were exercised was 30.0p (2023: 31.0p).
As at 31 December 2024, the total number of long-term incentive awards and share options held by employees was
30,586,785 (2023: 38,669,816) as follows:
Option price pence/share
Option period ending
2024
Number of
options
2023
Number of
options
1.00p – 23.83p
31 December 2024
–
2,247,373
18.42p – 25.17p
31 December 2025
2,153,699
2,798,180
1.00p – 37.92p
31 December 2026
3,601,679
7,493,226
1.00p – 169.50p
31 December 2027
3,657,112
300,000
1.00p – 143.30p
31 December 2028
25,000
45,000
1.00p – 125.00p
31 December 2029
2,500
2,500
1.00p
31 December 2030
–
–
1.00p
31 December 2031
–
2,487,464
1.00p
31 December 2032
3,867,625
8,984,712
1.00p
31 December 2033
9,171,765
14,311,361
1.00p
31 December 2034
8,107,405
–
At 31 December
30,586,785
38,669,816
26. Parent company profit and loss
As permitted by Section 408 of the Companies Act 2006, the income statement of the parent company is not
presented as part of these financial statements. The parent company’s loss for the financial year amounted to
£50,892,000 (2023: £11,762,000 loss).
Financial Statements
IQE Annual Report and Accounts 2024
163
Notes to the financial statements continued
for the year ended 31 December 2024
27. Cash generated from operations
Group
2024
£’000
2023
£’000
Loss before tax
(36,905)
(28,811)
Finance costs
3,947
3,032
Depreciation of property, plant and equipment
16,552
13,186
Depreciation of right-of-use assets
3,791
3,790
Amortisation of intangible assets
6,390
7,688
Impairment of intangible assets
3,772
–
Impairment of property, plant and equipment
4,615
–
Impairment of right-of-use assets
31
–
Gain on remeasurement of right-of-use assets
(202)
–
Inventory write downs (note 17)
391
522
Non-cash movement on trade receivable expected credit losses (note 23)
3
(1,808)
Non-cash provision movements
288
1,599
Gain on deemed disposal of JV
–
(2,419)
Profit on disposal of fixed assets
(797)
(152)
Share-based payments
3,174
2,565
Cash inflow/(outflow) from operations before changes in working capital
5,050
(808)
Decrease in inventories
3,677
7,503
(Increase) /decrease in trade and other receivables
(608)
6,601
Decrease in trade and other payables
(3,938)
(1,760)
Decrease in provisions
(2,899)
(1,462)
Cash inflow from operations
1,282
10,074
Company
2024
£’000
2023
£’000
Loss before tax
(50,892)
(11,764)
Finance income
(7,976)
(6,649)
Finance costs
2,026
1,222
Foreign exchange
427
(813)
Depreciation of property, plant and equipment
11
24
Amortisation of intangible assets
446
418
Impairment of intangible assets
59
–
Impairment of investments
506
17,627
Reversal of impairment in investments
(18,597)
–
Non-cash movement on trade receivable expected credit losses
64,476
(6,814)
Share-based payments
832
963
Cash outflow from operations before changes in working capital
(8,682)
(5,786)
Increase in trade and other receivables
(9,300)
(19,199)
Increase in trade and other payables
1,527
7,532
Cash outflow from operations
(16,455)
(17,453)
164
IQE Annual Report and Accounts 2024
28. Reconciliation of net cash flow to movement in net debt
2024
£’000
2023
£’000
Decrease in cash in the year
(910)
(5,409)
Increase in borrowings
(19,493)
(9,932)
Repayment of borrowings
4,048
28,363
Repayment of leases
3,470
4,787
Net movement resulting from cash flows
(12,885)
17,809
Net debt at 1 January
(48,528)
(66,498)
Net movement resulting from cash flows
(12,885)
17,809
Net movement on fair value of derivative instruments
–
381
Other non-cash movements
(7,917)
(220)
Net debt at 31 December
(69,330)
(48,528)
Other non-cash movements include £7,295,000 of lease modifications (2023: £860,000 lease additions) and the
impact of foreign exchange of £622,000 (2023: £639,000).
29. Analysis of net debt
At 1
January
2024
£’000
Cash
flow
£’000
Other
non-cash
movements
£’000
At 31
December
2024
£’000
Bank borrowings due after one year
(3,692)
(19,493)
(275)
(23,460)
Bank borrowings due within one year
(4,153)
4,048
105
–
Lease liabilities due after one year
(40,435)
–
(4,437)
(44,872)
Lease liabilities due within one year
(5,865)
3,470
(3,263)
(5,658)
Total borrowings
(54,145)
(11,975)
(7,870)
(73,990)
Cash and cash equivalents
5,617
(910)
(47)
4,660
Net debt
(48,528)
(12,885)
(7,917)
(69,330)
Cash and cash equivalents at 31 December 2024 and 31 December 2023 comprised balances held in instant access
bank accounts and other short-term deposits with a maturity of less than 3 months.
Other non-cash movements include £7,295,000 of lease modifications (2023: £860,000 lease additions) and the
impact of foreign exchange of £622,000 (2023: £639,000).
Financial Statements
IQE Annual Report and Accounts 2024
165
Notes to the financial statements continued
for the year ended 31 December 2024
30. Subsidiary undertakings
Name of company
Class of capital
Proportion of
shares held
Activity
Country of
incorporation
Registered Office
IQE (Europe) Limited
Ordinary shares
of £1
100%*
Manufacture of
advanced
semiconductor
materials
UK
Pascal Close, St
Mellons, Cardiff
CF3 0LW, UK
IQE Inc
Common stock
of $0.001
100%*
Manufacture of
advanced
semiconductor
materials
USA
119 Technology
Drive, Bethlehem,
PA 18015, USA
IQE KC LLC
Limited liability
company
100%*
Manufacture of
advanced
semiconductor
materials
USA
200 John Hancock
Road, Taunton, MA
02780, USA
IQE Taiwan ROC
Ordinary shares
of NT$10
100%
Manufacture of
advanced
semiconductor
materials
Taiwan
No. 2-1, Li-Hsin
Road
Hsinchu Science
Park
Hsinchu 300,
Taiwan
IQE RF LLC
Limited liability
company
100%*
Manufacture of
advanced
semiconductor
materials
USA
265 Davidson
Avenue Somerset,
NJ 08873, USA
IQE Silicon
Compounds Limited
Ordinary shares
of £1
100%
Manufacture of silicon
epitaxy
UK
Pascal Close, St
Mellons, Cardiff
CF3 0LW, UK
MBE Technology Pte
Ltd
Preferred shares
of S$1
Ordinary shares
of S$1
100%
Manufacture of
advanced
semiconductor
materials
Singapore
30 Tampines
industrial Avenue 3
Singapore 528775
CSDC Private
Limited
Common stock
of $1 par value
100%*
Research, development
and manufacture of
semiconductor
materials
Singapore
30 Tampines
industrial Avenue 3
Singapore 528775
Wafer Technology
Limited
Ordinary shares
of £1
100%*
Manufacture of
semiconductor
compounds and ultra-
high purity materials
UK
Pascal Close, St
Mellons, Cardiff
CF3 0LW, UK
NanoGaN Limited
Ordinary shares
of £0.001
100%
Development of
advanced
semiconductor
materials
UK
Pascal Close, St
Mellons, Cardiff
CF3 0LW, UK
Galaxy Compound
Semiconductors Inc
Common stock
of $0.00 par
value
100%*
Manufacture of
semiconductor
compounds and ultra-
high purity materials
USA
9922 E
Montgomery
Avenue, #7,
Spokane, WA
99206, USA
EPI Holdings Limited
Ordinary shares
of £1
100%
Dormant holding
company
UK
Pascal Close, St
Mellons, Cardiff
CF3 0LW, UK
KTC Wireless LLC
Limited liability
company
100%
Dormant holding
company
USA
119 Technology
Drive, Bethlehem,
PA 18015, USA
IQE USA Inc
Limited liability
company
100%
Dormant holding
company
USA
119 Technology
Drive, Bethlehem,
PA 18015, USA
166
IQE Annual Report and Accounts 2024
30. Subsidiary undertakings continued
IQE Solar LLC
Limited liability
company
100%*
Dormant company
USA
119 Technology
Drive, Bethlehem,
PA 18015, USA
IQE Properties Inc
Limited liability
company
100%*
Property holding
company
USA
119 Technology
Drive, Bethlehem,
PA 18015, USA
Wafer Technology
International Limited
Ordinary shares
of £1
100%
Holding company
UK
Pascal Close, St
Mellons, Cardiff
CF3 0LW, UK
Compound
Semiconductor
Centre Limited
Preferred A and
B shares of £1
Ordinary shares
of £1
100%*
Research, development
and manufacture of
semiconductor
materials
UK
Pascal Close, St
Mellons, Cardiff
CF3 0LW, UK
* Indirect holdings
The proportion of voting rights of subsidiaries held by the Group is the same as the proportion of shares held. All UK
subsidiaries are exempt from the requirements to file audited financial statements by virtue of Section 479A of the
Companies Act 2006. In adopting the exemption, IQE plc has provided a statutory guarantee to these subsidiaries in
accordance with Section 479C of the Companies Act 2006.
Financial Statements
IQE Annual Report and Accounts 2024
167
Notes to the financial statements continued
for the year ended 31 December 2024
31. Related party transactions
Company
Transactions with Group Companies
2024
Income
£’000
Expense
£’000
Trade
Receivable
£’000
Trade
Payable
£’000
Loan
Receivable
£’000
Loan
Payable
£’000
IQE (Europe) Limited
827
(158)
310
–
316
–
IQE Silicon Compounds Limited
7,862
–
480
–
2,058
–
NanoGaN Limited
–
–
–
–
–
(1,750)
Wafer Technology International Limited
–
–
–
–
–
–
Wafer Technology Limited
178
(11)
141
(3)
–
(4,163)
IQE USA Inc
–
–
–
–
9,932
–
IQE Inc
741
(78)
489
(6)
130,429
–
IQE KC LLC
4,573
(1)
597
–
–
(17,223)
IQE RF LLC
–
–
–
–
562
–
KTC Wireless LLC
–
–
–
–
–
(20,262)
Galaxy Compound Semiconductors Inc
90
–
54
–
–
(10,232)
IQE Taiwan ROC
21
–
–
–
–
–
Compound Semiconductor
Centre Limited
108
–
120
–
–
(2,322)
As at 31 December 2023, IQE plc had a fully impaired loan receivable of £7,794,000 due from MBE Technology Pte
Limited and £7,714,000 due from CSDC Private Limited. During 2024, the Company entered Deeds of Termination with
MBE Technology Pte Ltd and CSDC Private Limited and irrevocably waived the loans.
IQE plc has recognised an expected credit loss within the year of £64,476,000 (2023: reversal £6,814,000) in respect of
loan receivables from Group companies. As at the year end, IQE plc has recognised a total expected credit loss of
£78,270,000 (2023: £13,794,000).
2023
Income
£’000
Expense
£’000
Trade
Receivable
£’000
Trade
Payable
£’000
Loan
Receivable
£’000
Loan
Payable
£’000
IQE (Europe) Limited
842
(145)
598
(194)
7,036
–
IQE Silicon Compounds Limited
1,548
–
4,429
(102)
41,206
–
NanoGaN Limited
–
–
–
–
–
(1,750)
Wafer Technology
International Limited
–
–
–
–
–
–
Wafer Technology Limited
244
(20)
190
–
–
(2,874)
IQE USA Inc
–
–
–
–
9,447
–
IQE Inc
874
(12)
620
(45)
108,471
–
IQE KC LLC
4,084
(3)
4,546
(1)
–
(10,055)
IQE RF LLC
–
–
–
–
64
–
KTC Wireless LLC
–
–
–
–
–
(19,100)
Galaxy Compound
Semiconductors Inc
86
–
68
–
–
(8,598)
IQE Taiwan ROC
50
–
331
–
–
–
MBE Technology Pte Limited
1
–
–
–
–
–
CSDC Private Limited
–
–
–
–
–
–
Compound Semiconductor
Centre Limited
8
–
6
–
251
–
168
IQE Annual Report and Accounts 2024
32. Commitments
The Group had capital commitments at 31 December 2024 of £162,000 (2023: £553,000).
33. Post balance sheet events
On 10 March 2025, resolutions were passed by shareholders to issue secured zero-coupon convertible loan notes
with a conversion price of 15 pence per ordinary share in the Company to raise aggregate subscription proceeds of
£18,000,000. The initial term of the loan notes is 12 months, with an option to extend for a further six months. The loan
notes are secured against the Company's assets in the UK and subordinated to the Company's existing financing
facility with HSBC UK Bank PLC which has been amended and restated accordingly upon issuance of the loan notes.
These events are non-adjusting and therefore had no impact on net assets, loss after tax or total cash flow for 2024.
Financial Statements
IQE Annual Report and Accounts 2024
169
Glossary
Glossary
Artificial intelligence
(AI)
A simulation of human intelligence in machines, including machines which are
programmed to mimic human action or exhibit humanistic traits such as learning
or problem-solving
Augmented Reality
(AR)
A technology that superimposes a computer-generated image on a user’s view of
the real world to provide a composite view
Compound
semiconductor
A semiconductor formed from more than one element, typically comprising a mixture
of elements from Groups III and V of the Periodic Table
Cloud computing
A network of remote servers hosted on the internet to store, manage and
process data
CMOS++
Compound materials on Silicon
CMD
Capital Markets Day
CVD
Chemical Vapour Deposition. IQE’s technique for making Advanced Silicon/Group IV
epiwafers, characterised by using compound sources flowed across a hot wafer
where they are ‘cracked’ (reacted) to get the desired material
Device structure
The term used to describe the particular series of epitaxial layers on a substrate
crystal. They are typically specified by their thickness, composition, electrical and
opto-electronic properties
Dilute Nitride
A material where small amounts of Nitrogen are added to GaAs in order to enable
GaAs to be used in applications typically reserved for InP
Epitaxy (epitaxial
growth)
Deposition of high quality, crystalline layers on a substrate. By specifically choosing
the composition and sequence of the layers in epitaxial growth, the optical and
electrical properties of the epiwafer are able to be tuned and these individual layers
are referred to as ‘epilayers’
Epiwafer or epitaxial
wafer
The term used to describe the substrate crystal with epitaxial layers deposited
thereon (see also ‘wafer’)
GaAs
Gallium Arsenide
GaN
Gallium Nitride
GaSb
Gallium Antimonide
Ge
Germanium
InP
Indium Phosphide
Internet of Things
(IoT)
Network of physical objects – ‘things’ which are able to collect and transfer data over
a wireless network without human intervention
IR
Infrared
LiDAR
Light detection and ranging – a method for measuring distances by illuminating the
target with a laser light
MBE
Molecular Beam Epitaxy. One of IQE’s primary techniques for making compound
semiconductor epiwafers, characterised by deposition using elemental sources
impinging on a hot wafer where a reaction occurs to get the desired material. MBE
occurs at extremely low pressure (known as ultra-high vacuum) which is comparable
to that of outer space
170
IQE Annual Report and Accounts 2024
MOCVD
Metal Organic Chemical Vapour Deposition. One of IQE’s primary techniques for
making compound semiconductor epiwafers, characterised by deposition using
compound sources that are flowed across a hot wafer where they are ’cracked’
(reacted) to get the desired material. MOCVD occurs at much higher pressures than
MBE and also goes by the name MOVPE (Metal Organic Vapour Phase Epitaxy)
OEM
Original equipment manufacturer
Opto-electronic
device
A device or structure in which light and electricity interact to produce, detect or
manipulate light
PHEMT
Pseudomorphic High Electron Mobility Transistor. A commonly used device for high-
speed switching for wireless communications
QDL
Quantum dot laser. A type of semiconductor laser technology that extends the
wavelength to longer values for GaAs. Three dimensional islands (dots) are
engineered to be formed during the growth of the structure active region.
Reactor
The equipment used to produce epitaxial layers on a substrate
RF
Radio frequency
RGB display
Three-colour display where emissions from red, blue and green pixels create the
image.
SBTi
Science-Based Target initiative. The SBTi defines and promotes best practice in
emissions reductions and Net Zero targets in line with climate science
Semiconductor
A material with resistivity which lies somewhere between that of a conductor and an
insulator
Si
Silicon
SiC
Silicon Carbide
Structured light
scanner
A 3D scanning device which measures an object using projected light patterns and a
camera system
Substrate
The term used to describe the base wafer used for the epitaxial substrate crystal
growth process
Time of Flight (ToF)
camera
A camera which calculates the distance between the subject by measuring the trip
time of an artificial light signal emitted by a laser or LED
VCSEL
Vertical Cavity Surface Emitting Laser, an opto-electronic component used in a variety
of applications
Wafer
The term used to describe the substrate crystal in the form of thinly sliced discs or the
substrate disc with one or more epitaxial layers deposited upon it
WiFi 6
Sixth generation of wireless local area networking technologies characterised by
improved performance characteristics
3D Sensing
Three-dimensional depth sensing technology which is enabled by IQE’s VCSELs
5G
5th generation mobile network designed to provide enhanced connectivity and
higher speeds
Other Information
IQE Annual Report and Accounts 2024
171
Investor information
Registered Office
Pascal Close
St Mellons
Cardiff CF3 0LW
United Kingdom
Investor Relations
Amy Barlow
Phone: +44 (0)2920 839 400
investors@iqep.com
Principal Banker
HSBC Bank Plc
8 Canada Square
London E14 5HQ
Auditor
KPMG LLP
3 Assembly Square
Britannia Quay
Cardiff CF10 4AX
Investor information
Oct-24
Jul-24
Apr-24
Jan-24
Dec-24
Share price (GBP)
55
60
50
45
40
35
30
25
20
15
10
Share price information
Exchange: London Stock Exchange FTSE AIM Index
Ticker: IQE:LN
ISIN: GB0009619924
Share price performance
as at 31 December 2024
Loss per share: (3.96p)
Nominated Advisers and Brokers
NOMAD and Joint Broker
Peel Hunt LLP
7th Floor
100 Liverpool Street
London EC2M 2AT
Joint Broker
Deutsche Numis
45 Gresham Street
London EC2V 7BF
Registrar
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Financial Public Relations
Headland Consultancy
3rd Floor, One New Change
London EC4M 9AF
iqe@headlandconsultancy.com
172
IQE Annual Report and Accounts 2024