Cardiff, UK. 20 October 2017: IQE plc (AIM: IQE, "IQE" or the "Group"), the leading global supplier of advanced wafer products and wafer services to the semiconductor industry, announces the settlement of prior years' tax liabilities.
The Group recently engaged the services of an international tax firm to assist with a routine US tax filing for the year ended 2016. Unexpectedly, this exercise has identified taxes due in the US relating to the profits of an overseas subsidiary for the years ending 2013, 2014, 2015 and 2016, which follow the acquisition of the epitaxy business of Kopin in January 2013. This firm has estimated the tax due as approx. £4.2m, and is in the process of calculating the actual amount, which may take up to 4 weeks. IQE immediately initiated the payment of the estimated amount to the relevant tax authority, and will adjust any over/under payment in due course. On the advice of this firm, IQE has also accrued interest due of up to £0.4m. As a result of a Group re-organisation initiated in September 2016, but unrelated directly to this previously advised tax treatment, it is believed that no similar tax liability arises in 2017.
IQE has historically used a local independent firm of tax advisors for routine corporate tax filings, supplemented with the advice of larger firms of independent tax advisors for tax strategy, planning, and transactional work. The original tax structuring of the acquisition of the Kopin epitaxy business was done in accordance with advice of a large mid-tier US legal and tax firm working in conjunction with IQE's local independent tax advisor. IQE used the same local independent firm to complete the routine tax returns for 2013 to 2015, and supplemented this for 2016 with the international tax firm to bring expertise around the aforementioned restructuring. The same international tax firm has supported IQE with its transfer pricing compliance for the last four years, and in other ad hoc areas as necessary. IQE is clearly extremely disappointed with the previous professional advice received and will be pursuing full recompense as a matter of priority with the previous advisors.
The tax paid was previously unaccrued, and hence this will result in a prior year adjustment to the comparative figures in the next annual report. There is no impact, or additional tax payable, on the expected trading results for 2017.
Whilst there are no indications of any further potential omissions, the Board yesterday approved the use of an international independent tax firm to undertake a complete IQE group tax review.
The Group has enjoyed a strong Q3 with continuing growth driven largely by the ongoing strong VCSEL ramp in support of a highly significant mass market consumer application, and the new Foundry expansion remains on course to open in H1 2018. As a result, the Board remains confident the Group is on track to deliver full year expectations, including that of net debt.
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
CONTACTS IQE plc +44 (0) 29 2083 9400 Drew Nelson Phil Rasmussen Chris Meadows
Canaccord Genuity + 44 (0) 20 7523 8000 Simon Bridges Henry Fitzgerald O'Connor Richard Andrews
Peel Hunt +44 (0) 20 7418 8900 Edward Knight Nick Prowling
