1st Quarter Results

1st Quarter Results 

    LONDON--(BUSINESS WIRE)--April 23, 2003--

     ARC International Plc Results for the First Quarter Ended 31
                              March 2003

ARC International plc (LSE: ARK), a world leader in semiconductor and
software technology licensing, announces its unaudited financial
results for the first quarter ended 31 March 2003.

Financial and Operational Highlights:

First Quarter ended 31 March 2003:

- Turnover up 6% in the quarter on prior year quarter and down 10%
sequentially to £2.9 million (Q1 2002: £2.7m, Q4 2002: £3.2m)

- Pre-exceptional net loss of £4.4m (including an £0.8 million tax
refund), a 19% year on year improvement (Q1 2002: £5.4m)

- 7 new design licences won for the ARCtangent(TM) processor

- Strong performance on USB Now(TM) product sales, booked 7 licenses

- Software and development tools products shipped to more than 50
customers

- Asia accounted for 8% of revenues

Commenting on the results, Mike Gulett, Chief Executive Officer, said:

"Despite the continued uncertainty in our markets and the deferral of
several licensing deals into the second quarter, we booked 14 licenses
for our ARCtangent and USB products combined. These deals were signed
with companies such as Altek, Conexant, and ST Microelectronics. We
also announced that LSI Logic has licensed ARC's USB High-Speed
On-the-Go (OTG) technology.

An increasing number of ARC's products are being put into production
across a diverse range of markets. In the Digital Still Camera space,
ARC's technology is used in Fujifilm, Axiz, HP, Logitech, Polaroid,
Radio Shack, RCA and Toshiba products. Emerging markets for our
technology include biometrics, storage devices and industrial control.
We expect our customers in those areas to begin shipping products this
year.

Looking ahead, we do not anticipate any significant changes in market
conditions over the next quarter. We are confident that our strategy
of providing a total system solution will help to drive the business
towards profitability and create a sustainable long-term business."

For further information, please contact:

ARC International plc
Mike Gulett Chief Executive Officer, +[phone]
Monica Johnson Chief Financial Officer, +[phone]
www.ARC.com

Tulchan Communications
Julie Foster Consultant, [phone]
www.tulchangroup.com

An analyst conference call will be held at 9:30am on 23rd April, 2003.
The presentation will be available on the website www.ARC.com. A
recording of this meeting will also be available on the website.

Chief Executive Officer's Review

Overview

In the first quarter of 2003, ARC reported a 6% increase in turnover
to £2.9 million, up from £2.7 over the same quarter last year but down
10% quarter on quarter (Q4 2002: £3.2 million). At constant exchange
rates, this represents an 18% increase year over year and a sequential
decline of 9%. Despite ongoing, challenging market conditions, tight
management of costs resulted in a pre-exceptional net loss of £4.4
million, which is down 19%, (Q1 2002: £5.4 million). Operating
expenses before exceptionals, amortisation and depreciation year on
year were also reduced by 4% to £7.1 million.

Many of our current and prospective customers continue to delay new
product development, which deferred the signing of new licenses for
our products into the second quarter. During the first quarter, we
booked 14 new design licenses including 7 customers for the ARCtangent
processor and 7 licenses for USB. We are pleased with the development
of our Asian business, a market that presents us with significant
opportunities for the future. Sales in Asia during the first quarter
accounted for 8% of total revenue.

Share Buyback

We continue to remain on track for the share buyback programme.
Earlier this month, we received the necessary court approval and the
tender offer is on schedule to be launched in early May.

Product Strategy and Customer Focus

The clearest indication of the success of ARC's "total system
solution" is reflected in our revenue diversity; 35% of revenues came
from processor cores, 31% from toolsets and software and 34% from
peripherals.

Our SoC customers are divided across the consumer, networking and
computing sectors and we are strong in semiconductors for wired and
wireless communications as well as consumer electronics. On the
software side, increasingly ARC's technology is being licensed by
companies in industrial control, broadband networking and digital
imaging.

This quarter we secured licenses with Altek Labs, Inc, Conexant and ST
Microelectronics, among others. Altek is one of the world's leading
manufacturers of digital still cameras. Conexant is a worldwide leader
in semiconductor solutions that facilitate communications worldwide
through wireline voice and data networks. ST Microelectronics is a
leader in developing and delivering semiconductor solutions across the
spectrum of microelectronics applications. We are also on track to
unveil the details of several new products later in the year, which
will continue to strengthen our market position.

USB NOW(TM)

Our USB 2.0 products continue to be among our most popular products.
Of the thirteen licenses previously announced in 2002, seven are in
development, with two of those expecting to reach the manufacturing
stage during the first half of the year. An eighth company has
completed development of the product and is ready to prototype in May.
We announced our relationship with LSI Logic, a leading designer and
manufacturer of communications, consumer and storage semiconductors.
LSI Logic will integrate ARC's USB technology into its CoreWare(R)
library of intellectual property, making it available to a much larger
audience.

Our earlier USB products are equally popular, especially among vendors
of digital still cameras and multi-function printers. Our technology
is currently found in digital still cameras made or marketed by Agfa,
Axia, Casio, Concord, Kodak, Minolta, Ricoh, Samsung, and Toshiba,
among others.

We are currently introducing a full line of class driver software for
our USB family.

ARCtangent(TM) Processor

The ARCtangent processors are being used in a number of innovative new
products including: a DVD Player being shipped by AMLogic, Video on
Demand by Xiran, and a Fingerprint Scanner by ST Microelectronics.
These products have been designed with the ARCtangent as their core
processor.

This week we unveiled our multimedia strategy at the Embedded Systems
Conference in San Francisco. The product family will include
ARCtangent-specific software codecs for the most popular consumer
electronics applications, which will enable ARC to provide a more
complete solution, opening up new vertical market opportunities.

Software and Development Tools

Our software team continues to experience successes across all product
lines. In January, we introduced the ARC OS-Changer, which allows
software engineers to transfer their application software from third
party operating systems to the ARC/MQX Real Time Operating System.
This opens up additional market opportunities for us.

Our relationship with Metrowerks/Motorola continues to strengthen.
This week we announced the availability of our MetaWare/CodeWarrior
bundle for Motorola(R)'s ColdFire(TM) MCF5282 Processor. It is
currently being demonstrated at the Embedded Systems Conference (ESC)
in San Francisco. This processor is targeted at medical
instrumentation, food service equipment, home automation, industrial
control networking, security and lighting control applications. It has
been generating a high level of interest from our customers and is
only just starting to ship in production quantities.

Operational changes

The company continues to assess its cost base with respect to the
business environment. Based on a review of current business levels,
the company expects to take a nominal restructuring charge to cover
severance payments for a 7% reduction of the workforce that was
implemented in the current quarter.

Outlook

Looking ahead, we do not anticipate any significant changes in market
conditions over the next quarter and the SARS epidemic may affect the
speed of our Asian expansion.

We are confident that our strategy of providing a total system
solution will help to drive the business towards profitability and
create a sustainable long-term business. The management team we put in
place last year is having a positive impact on the company's
efficiency and we are in now in a much stronger position to benefit
from any upturn in the economy.

Financial Review

First Quarter ended 31 March 2003

Turnover

Total turnover for the first quarter was £2.9 million, up 6% year over
year and down 10% sequentially (Q4 2002: £3.2 million, Q1 2002: £2.7
million). Prior to currency translation with virtually all sales
denominated in US dollars, turnover was up 18% year over year and down
9% sequentially. License income was down by 11% over the previous
quarter at £2.2 million (Q4 2002: £2.5 million) while maintenance and
service income stayed the same at £0.5 million (Q4 2002: £0.5
million). Royalty income was unchanged at £0.2 million (Q4 2002: £0.2
million).

Within the turnover base, 22% of sales were in Europe, 70% in North
America and the remaining 8% in Asia. From a product perspective, 35%
were processor shipments, Software sales represented 31% and the
remaining 34% was peripheral sales.

Costs

Cost of sales of £0.4 million increased 13% sequentially (Q4 2002:
£0.3 million, Q1 2002: £0.4 million), which resulted in a gross margin
of 87% (Q4 2002: 89%, Q1 2002: 85%). Total operating expenses
(excluding exceptional costs, amortisation of goodwill and
depreciation) of £7.1 million were down 1% over the previous quarter
and 4% year over year (Q4 2002: £7.2 million, Q1 2002: £7.5 million).

Research and development costs of £3.4 million increased 3%
sequentially and increased 13% year over year (Q4 2002: £3.3 million,
Q1 2002: £3.0 million). The increase was related to the development of
recent product launches. Sales and marketing costs of £2.4 million
decreased 5% sequentially and decreased 11% year over year (Q4 2002:
£2.6 million, Q1 2002: £2.7 million). General and administration costs
of £0.9 million decreased 5% sequentially and decreased 29% year over
year (Q4 2002: £1.0 million, Q1 2002: £1.3 million).

The Company had 209 employees at 31 March 2003 compared with 225 at 31
March 2002 and 198 at 31 December 2002.

Interest

Interest income remained the same as the prior quarter at £1.0 million
and decreased by £0.1 million year over year based on the lower cash
balance (Q4 2002: £1.0 million, Q1 2002: £1.1 million).

Net loss

The net loss prior to exceptional items was £4.4 million representing
a sequential improvement of 11% and a 19% improvement year over year
(Q4 2002: £4.9 million, Q1 2002: £5.4 million). The net loss number
includes an R&D related tax refund of £0.8 million. Loss per share
prior to exceptional items decreased to (1.45) p (Q4 2002: (1.63) p,
Q1 2002: (1.90) p). Net loss including exceptional items was £3.8
million (Q4 2002: £4.3 million, Q1 2002: £5.4 million). The £0.5
million exceptional item relates to the release of a provision for the
Ottawa restructuring following the executed lease termination in
Q12003.

Cash flow and balance sheet

The net cash outflow from operations was £5.4 million (Q4 2002: £4.3
million, Q1 2002: £6.0 million). Capital expenditure was £0.9 million.
The movement in net funds during the quarter was an outflow of £4.4
million. Net assets at 31 March 2003 were £111 million, including net
cash of £96.5 million.


ARC International plc

Consolidated profit and loss account 
for the quarter ended 31 March 2003


                                         3 months   3 months     Year
                                            ended      ended    ended
                                               31         31       31
                                            March      March December
                                             2003       2002     2002
                                       (unaudited)(unaudited)(audited)
                                            £'000      £'000    £'000

Turnover                                    2,891      2,731   11,702

Less: Operating costs
     Goodwill amortisation                   (968)    (1,022)  (4,093)
     Exceptional credit/(costs)               536         73   (1,501)
     Other operating costs                 (8,059)    (8,288) (32,488)
                                           (8,491)    (9,237) (38,082)

Loss before interest and tax               (5,600)    (6,506) (26,380)
Add: Interest receivable and similar
 income                                       964      1,125    4,414
Less: Interest payable and similar
 charges                                       (1)         -      (11)
Loss on ordinary activities before tax     (4,637)    (5,381) (21,977)
Less: Tax on loss on ordinary
 activities                                   821         (2)     (69)
Retained loss for the period               (3,816)    (5,383) (22,046)

Basic loss per share                      (1.27)p    (1.88)p  (7.54)p
Diluted loss per share                    (1.27)p    (1.88)p  (7.54)p
Pre-exceptional loss per share            (1.45)p    (1.90)p  (7.02)p

Summary of operating expenses

Operating costs
   Cost of sales                             (387)      (397)  (1,323)
   Research and development                (3,400)    (3,043) (13,052)
   Sales and marketing                     (2,437)    (2,734) (10,053)
   General and administration                (922)    (1,299)  (4,913)
   Depreciation of fixed assets              (913)      (742)  (3,147)
   Amortisation of goodwill                  (968)    (1,022)  (4,093)
   Exceptional costs - Provision
    release                                   536          -      899
   Exceptional costs - Restructuring                       -   (2,400)
Total operating expenses                   (8,491)    (9,237) (38,082)
                                       -------------------------------

ARC International plc
Consolidated balance sheet 
as at 31 March 2003

                                                      As at     As at
                                                         31        31
                                                      March  December
                                                       2003      2002
                                                 (unaudited) (audited)
                                                      £'000     £'000

Fixed Assets
Intangible assets                                     6,797     7,765
Investment in own shares                              1,660     1,660
Tangible assets                                       6,239     6,419
                                                     14,696    15,844

Current Assets
Stock                                                    89        88
Debtors                                               5,468     4,981
Investments - bank deposits                          92,405    98,064
Cash at bank and in hand                              4,121     2,921
                                                    102,083   106,054

Creditors - amounts fully due within one year        (4,486)   (4,578)

Net current assets                                   97,597   101,476

Total assets less current liabilities               112,293   117,320
Creditors - Amounts falling due after more than
 one year                                                 -         -

Provision for liabilities and charges                (1,218)   (2,566)

Net assets                                          111,076   114,754


Capital and reserves
Called up share capital                                 303       300
Share premium account                               154,896   152,661
Exchangeable shares                                   1,807     4,040
Merger reserve                                          107       107
Other reserves                                        1,405    23,065
Profit and loss account                             (47,442)  (65,419)
Total shareholders' funds                           111,076   114,754
                                                 ---------------------

ARC International plc
Consolidated cash flow statement 
for the quarter ended 31 March 2003

                                         3 months   3 months     Year
                                            ended      ended    ended
                                               31         31       31
                                            March      March December
                                             2003       2002     2002
                                       (unaudited)(unaudited)(audited)
                                            £'000      £'000    £'000
Net cash outflow from operating
 activities                                (5,442)    (5,963) (19,627)
Returns on investments, servicing of
 finance and taxes paid
Taxes paid/received                           832          -      (81)

Interest received                             904      1,317    3,732
Bank interest paid                             (1)         -      (11)
Interest element on finance lease
 rentals                                        -          -
Net cash inflow from returns on
 investments and servicing of finance       1,735      1,317    3,640

Capital expenditure and financial
 investment
Purchase of tangible fixed assets            (902)    (1,322)  (3,295)
Purchase of intangible fixed assets             -          -      (64)
Disposal of tangible fixed assets             168          -        -
Investment in own shares                        -          -   (1,660)
Net cash outflow from capital
 expenditure and financial investment        (734)    (1,322)  (5,019)

Net cash outflow before management of
 liquid resources and financing            (4,441)    (5,968) (21,006)

Management of liquid resources
Movement on term deposits                   5,659      5,861   21,337

Financing
Issue of ordinary share capital - IPO
 and options                                    5        592    1,399
Capital element of finance lease
 rentals                                        -         (1)      (5)
Decrease in borrowings                          -          -        -
Net cash inflow from financing                  5        591    1,394

(Decrease)/Increase in net cash during
 the period                                 1,223        484    1,725
                                       -------------------------------

About ARC International

ARC International pioneered the integrated development environment for
SoC design in an effort to minimize design risk for customers
developing next generation wireless, networking and consumer
electronics products. ARC introduced the industry's first
user-customizable 32-bit RISC/DSP processor core. In early 2000, ARC
became the first company to integrate the development tools,
peripherals, RTOS and software that enable the designer to better
design optimization and performance. ARC's approach to providing a
single source for the major SoC building blocks reduces the number of
IP suppliers, reduces cost, reduces the risk of system-on-chip design
and reduces time-to-market.

ARC's products include:

- The ARCtangent(TM) user-customizable 32-bit RISC/DSP processor;

- An industry-leading family of high-speed and full-speed USB OTG and
other peripherals;

- MetaWare(R) C/C++ Compiler, the most popular integrated software
development tool suite for SoC design;

- SeeCode(TM ), the leading tool for simultaneous, multi-processor
debugging;

- Precise/RTCS(TM), embedded Internet stack and related software
protocols;

- Precise/MQX(TM), a scalable real-time operating system (RTOS).

- ARC's software tools, RTOS and embedded software are also available
for ARM, PowerPC and MIP's processors.

ARC International employs approximately 200 people in research and
development, sales and marketing offices across North America, Europe
and Asia. Full details of the company's locations and other
information are available on the company's website, www.ARC.com. ARC
International is listed on the London Stock Exchange as ARC
International plc (LSE:ARK).

Statements made in this report that are not historical facts include
forward-looking statements that involve risks and uncertainties.
Important factors that could cause actual results to differ from those
indicated by such forward-looking statements include, among others,
market acceptance of the ARC technology; fluctuations in and
unpredictability of the Company's quarterly results; general economic
and business conditions; regulatory policies adopted by governmental
authorities; assumptions regarding the Company's future business
strategy; changes in technology; competition; ability to attract and
retain qualified personnel; risks associated with the Company's
international operations; and other uncertainties that are discussed
in the "Investment Considerations" section of the Company's listing
particulars dated 28 September 2000 filed with the United Kingdom
Listing Authority and the Registrar of Companies in England and Wales.
The Company disclaims any intention or obligation to update any
forward-looking statements as a result of developments occurring after
the date such statement was first made

ARC, the ARC logo, ARCtangent, USB Now and WLAN Now are trademarks of
ARC International. All other brands or product names are the property
of their respective holders.

   Short Name: Arc Intl PLC
   Category Code: QRF
   Sequence Number: 00004185
   Time of Receipt (offset from UTC): 20030422T184801+0100