3rd Quarter & 9 Mths Results

IQE PLC
22 November 2000


   

                          IQE plc

 IQE Quarter Three and Nine Month Results - Record Profits
                       and Earnings,

   Major Announcements on Acquisition and New Subsidiary

IQE plc, the leading outsource supplier of epiwafers to the
compound semiconductor industry is pleased to announce its
Q3 results for the period ended 30 September 2000 showing
record profits, earnings and orders.

Highlights :
*    Sales increased by 39% for Q3  to £6.431 million (1999
     : £4.627 million) and by 41% to £19.639 million (1999
     : £13.975 million) for the nine month period despite
     limited production capacity availability.

*    Net profit before tax and exceptional charges for Q3
     increased by 190% to £0.875 million (1999 : £0.302
     million ) and increased by 93% to £1.786 million (1999
     :  £0.925 million) for the nine month period.

*    EPS for Q3 increased by 265% to 0.372 pence (1999:
     0.102p) and by 170% to 0.729p (1999 : 0.27 pence) for
     the nine month period. (Adjusted for the 10:1 share
     split which occurred in September.)

*    Order intake for Q3 increased by 85% to £12.157
     million (1999 : £6.573 million) a record for the
     Group. The order backlog was £15.539 million also a
     record (1999 : £8.143 million).

*    First major strategic acquisition of Wafer Technology
     International Limited completed for £41.3 million
     in cash and shares.

*    Announcement of new subsidiary to enter compound
     silicon epitaxy marketplace; first major contract
     signed with Bookham Technology plc.

*    Two additional multiwafer MOCVD reactors and one
     additional large scale MBE reactor received during Q3
     which are expected to boost output from end of Q1
     2001.

*     Four previously delivered reactors now qualified by
     customers and entering initial production in Q4.

*    Several senior management appointments completed.


Dr Drew Nelson, Chairman & CEO commented :

'The Group continues to make highly significant progress
and today announces record profits and earnings despite
revenue growth limited to 39% in Q3 because of timing
issues on adding capacity. New capacity will contribute
strongly to increased revenues in Q4 and onwards as the
systems delivered earlier this year enter production. In
addition, we have today announced two major corporate
events; our first major acquisition of Wafer Technology
International Limited, and the setting up of a new 
subsidiary to address the rapidly growing market for
compound epitaxy based on silicon substrates together
with a Service and  Supply Agreement with Bookham
Technologies plc. These announcements are key
milestones in the development of the Group's strategy to be
the leading outsource epitaxy company worldwide.'



For further information please contact:

IQE  plc
Drew  Nelson,                   Tel: [phone]
Buchanan Communications
Tim Thompson / Nicola Cronk,    Tel: [phone]
Introduction

The Group's outsource products and services continue to  be
in   very   strong   demand,  driven  by   the   continuing
communications  needs to expand the Internet infrastructure
via higher capacity and faster optical fibre data links, to
provide  increasingly  sophisticated mobile  communications
systems  and  to  address higher speed, large  volume  data
storage  by  optical  technologies  such  as  DVD.   As   a
consequence,  the Group has recently won several  important
contracts, the details of which will be announced soon.  In
addition,    many   other   applications    for    compound
semiconductors continue to grow strongly and outsourcing is
becoming a much higher priority for many companies who wish
to manage risk more appropriately.

Today,  in  addition to publishing its Q3  and  nine  month
results,   the   Group   has  also  announced   two   major
developments  which are key milestones in  cementing  IQE's
position  as  the  leading outsource  provider  of  epitaxy
services   and   products  to  the  Compound  Semiconductor
Industry on a global basis.

Firstly,  the  Group has made its first  major  acquisition
that of Wafer Technology Limited, a global supplier of III-
V  compound  semiconductor substrates  and  materials.  The
acquisition  will  allow IQE to offer a unique  and  secure
range   of   outsource  wafer  products  to  the   Compound
Semiconductor Industry and will introduce new customers  to
both IQE and Wafer Technology Limited. It will also provide
IQE  direct  access  to  key Indium Phosphide  (InP)  wafer
products,  which  are not only critical  for  most  optical
fibre  light  emitting and detecting devices but  are  also
viewed   as   an  essential  material  for  the  electronic
components required for higher speed communication systems.
The acquisition is being financed by a combination of cash,
loan   notes   and  shares  totalling  £41.3   million   at
yesterday's  closing IQE share price and  will  immediately
increase the Group's pre-goodwill earnings.  It is worth
noting that the earlier raising of funds in September for
acquisitions was instrumental in closing this transaction.

Secondly,  a  new  subsidiary of IQE has  been  created  to
address   the  rapidly  growing  market  for  sophisticated
epitaxial  wafer  services  based  on  silicon  substrates,
including  selective  Si  epitaxy  and  compounds  such  as
Silicon  Germanium  (SiGe).  This  subsidiary  has  already
signed   a   Service  and  Supply  contract  with   Bookham
Technologies plc for the provision of epitaxy services  and
is  in  active  negotiation  with  several  major  European
manufacturers  of  Si based ICs. The new  company  will  be
called  IQE  Silicon Compounds Limited and it will  be  the
first  epitaxy  foundry on Si wafers in Europe,  commencing
operations  in Q1 2001. It will be financed principally  by
lease  finance,  assisted by major development  grants  and
customer funding from an early stage of its operation. This
new  subsidiary will be highly complimentary to the Group's
existing   epiwafer   business,  with   several   customers
potentially  being supplied by both the  existing  and  new
businesses.

Overview of Existing Operations

Good  progress  on  the Group's core  activities  was  made
during   Q3  with  several  important  contract  wins   and
successful completion of qualification on a number  of  the
large  capacity systems which were delivered  earlier  this
year.   In particular, two of the MOCVD systems in  Cardiff
are  now  in  initial production and a third will  commence
soon,  providing a significant boost to capacity and  sales
in Q4. A further two MOCVD systems were delivered in Q3 and
will  contribute  to capacity in the first  half  of  2001.
Important contracts have been won for VCSEL production, red
lasers  for  DVD applications and HBT wafers  for  wireless
applications.  Further details of these contracts  will  be
released soon.

The  two new systems delivered to our Bethlehem site at the
end  of  June were successfully commissioned during Q3  and
have been undergoing customer qualification.  They are  now
qualified  with two major customers and will contribute  to
increased  revenue  in  Q4,  as previously  indicated.   An
additional  reactor  was delivered  in  Q3  with  two  more
scheduled for Q4, all of which will contribute strongly  in
2001.   Important contract wins for wireless  communication
wafers were also made by the Bethlehem site.

The  Group  made  a number of key appointments  during  Q3,
including  the  appointment  of  Steve  Byars  as  Managing
Director of IQE Europe, Ren Jenkins as Director of Sales  &
Marketing  North  America and Sam  Rogers  as  Director  of
Production in Bethlehem.  Steve Byars was previously CEO of
ESM (formerly NWL), Europe's leading silicon wafer foundry,
Ren  Jenkins  was a Sales & Marketing Director with  Lucent
Technologies  and  Sam Rogers was recruited  from  Sumitomo
Electric in San Jose.
In  addition,  a  new CFO to be based in the  UK is in the
final stages of recruitment and is expected to commence
with the Group in early 2001.

Capital  expenditure, including deposits on  new  equipment
was  £9.554  million  in  line with  our  accelerated  plan
discussed  at  the time of our interim results.  A  further
Long Term Purchase Agreement has been agreed with Aixtron.

Results for Q3 2000

Sales  for Q3 rose to £6.431 million, up 39% compared  with
the prior year period (1999 : £4.627 million) despite being
strongly  limited by the lack of capacity, particularly  in
Bethlehem, due to delayed delivery of systems as previously
indicated  in the Q2 interim announcement and  the  routine
maintenance  cycle  of other larger scale  reactors.  These
capacity constraints will be significantly relieved  in  Q4
as  three  of  the  new  systems  are  now  qualified  with
customers    and   initial   production   has    commenced.
Nonetheless, gross profits improved to £2.300  million  (Q3
1999  :  £1.480 million) and gross margin improved  to  32%
from  34%. S G & A costs were abnormally high in Q3 due  to
high  recruitment costs for several executives, but R  &  D
costs were limited due to lack of available capacity.   The
net result was a pre exceptional operating profit of £0.380
million,  up from £0.238 million (Q3 1999 : £0.238 million)
an  increase of 60%.  There was interest income  of  £0.494
million  in Q3 resulting in strongly increased pre tax  pre
exceptional  profits before tax of £0.875 million  (1999  :
£0.302  million) an increase of 190%. Pre exceptional  post
tax profits increased 189% to £0.631 million (1999 : £0.219
million).   Including  exceptionals,   post   tax   profits
increased by 316% to £0.574 million (1999 : £0.138 million)
resulting in earnings per share adjusted for the 10:1 stock
split  of  0.372 pence compared with 0.102 pence per  share
for the same quarter in1999, an increase of 264%.

Results for nine months to 30 September 2000

Sales  for  the  first nine months were  a  record  £19.639
million,  an  increase of 41% over the prior year  (1999  :
£13.975  million)  despite continued capacity  constraints.
Overall gross margin was 34% compared with 33.7% for  1999,
resulting  in  increased gross profits  of  £6.680  million
(1999  :  £4.712 million) an increase of 42%. R &  D  costs
were  up  by 42% to £1.412 million (1999 : £0.993  million)
and  S  G  & A costs rose to £4.101 million (1999 :  £2.580
million)  due  to  significant investment  in  the  Group's
infrastructure to meet the increasing demands placed on the
Group  during  this rapid growth phase.  This  limited  the
operating profit to £1.167 million (1999 : £1.139  million)
although  net interest income of £0.619 million (1999  :  -
£0.214  million) helped increase pre tax profits  excluding
exceptionals to £1.786 million (1999 : £0.925  million)  an
increase  of  93%.  Earnings  for  the  nine  month  period
increased  by 170% to 0.729 pence per share (1999  :  0.270
pence  per  share), again after adjustment  for  the  stock
split.

Trading Prospects

As  discussed  at  the interim stage, the markets  for  our
products  are  continuing  to  grow  rapidly  with   demand
especially   strong   in   the   materials   for   Internet
infrastructure projects, such as Dense Wavelength  Division
Multiplexing (DWDM) optical fibre systems for long haul and
metro  networks, short haul optical fibre links and  mobile
telephony systems. In the opto electronic marketplace,  our
telecom products have penetrated some of the largest volume
customers  in the industry and there is growing demand  for
our VCSEL products, with a number of important contracts to
be  announced.  We have won an important contract  for  DVD
wafers  which  is  currently being finalised,  and  in  the
electronics  sector there is a continued trend towards  six
inch   manufacture,   strongly  supporting   the   strategy
identified  by the Group last year and the installation  of
six inch epiwafer capacity through 2000.

Our  order  intake for Q3 was £12.157 million, its  highest
ever  level  and  we continue to negotiate on  longer  term
contracts with major industry players. The backlog was  at
a record £15 million.

The  announcement today of our first major acquisition will
strengthen the Group's position as the leading provider  of
the   key   materials  epiwafer  product  to  the  Compound
Semiconductor  Industry and the establishment  of  our  new
subsidiary  to  provide  sophisticated  epitaxial  services
based   on   silicon  substrates  will  provide  additional
strength from the first half of 2001. These events are  key
milestones  in  establishing the Group as  the  pre-eminent
supplier  of  the  most comprehensive and secure  epitaxial
wafer service to the Global Semiconductor Industry.

Overall,  the  rapidly growing demand and  ever  increasing
range  and  size of applications for compound semiconductor
wafers  and  sophisticated epitaxial services represents  a
unique opportunity for the Group to establish itself as the
first  choice  supplier  globally for  outsource  epi-wafer
supply,  particularly as we have the financial strength  to
execute  our plans. Outsourcing continues to grow  strongly
in   importance  for  our  customers  and  consequently  we
continue to look forward to the future with a high level of
confidence.


Drew Nelson
Chairman, IQE plc
22 November 2000


IQE PLC
PROFIT AND LOSS ACCOUNT
                   3        3          9          9        12
               months    months     months     months   months
               30 Sep    30 Sep     30 Sep     30 Sep   31 Dec
                 2000      1999       2000       1999     1999
(All
figures     unaudited  unaudited  unaudited  unaudited audited 
GBP000s except
Earnings/Share)

Sales           6,431     4,627     19,639     13,975   19,043
Cost of Sales  (4,130)   (3,147)   (12,959)    (9,263) (12,558)
                                                              
Gross Profit    2,300     1,480      6,680      4,712    6,485
Gross Profit %   35.8      32.0       34.0       33.7     34.1

Research/ 
Development      (289)     (372)    (1,412)      (993)  (1,302)
Selling/General 
/Admin         (1,631)     (870)    (4,101)    (2,580)  (3,729)
Selling/General 
/Admin 
Exceptional         0         0          0          0        0

Operating         
Profit/(Loss)     380       238       1,167     1,139    1,454
Operating         
Profit/(Loss) %   5.9       5.1         5.9       8.1      7.6
                                                              
Interest          494        64         619      (214)    (261)
Receivable/
(Payable)
Interest              
(Payable)
Exceptional        0         0           0         0        0

Net Profit/(Loss) 
before Taxes/
Exceptionals     875       302       1,786       925     1,193

Net Profit/
  (Loss)%       13.6       6.5         9.1       6.6        6.3

Exceptional 
   Items         (57)      (80)       (180)     (497)     (499)
Current Taxes   (243)      (83)       (480)     (201)       47
Deferred Taxes    (0)       (0)         (0)      140       102
Dividend          (0)       (0)         (0)       (0)        0

Net Profit/(Loss) 
after             574       138       1,126       367      843
Taxes/Exceptionals
Earnings         0.37      0.10        0.73      0.27     0.60
Pence/Share based
on 1p shares
Earnings          
Cents/Share based
on 1p shares     0.55      0.16        1.13      0.44     1.00

BALANCE SHEET
               As At     As At       As At      As At     As At
              30 Sep     30 Sep     30 Sep     30 Sep    31 Dec
                2000       1999      2000       1999      1999
                                                              
(All figures unaudited  unaudited  unaudited  unaudited audited
GBP000s)                    

Fixed Assets                                                  
Tangible     
Fixed Assets   29,408    12,092    29,408     12,092    11,483

Current Assets
 Stocks         4,954     2,071     4,954      2,071     2,573
 Debtors        9,634     2,665     9,634      2,665     7,742
 Cash and     
    Bank       62,502    11,741    62,502     11,741     8,117
Total Current    
Assets         77,089    16,477    77,089     16,477    18,432
                                                              
Creditors
Falling       (12,010)   (3,957)  (12,010)    (3,957)   (4,517)
Due within One
Year

Net Current    65,080    12,520    65,080     12,520    13,915
Assets

Total Assets 
less Current
Liabilities    94,488    24,611    94,488     24,611    25,398

Creditors Falling
Due after One
Year
   Deferred     
   Income         (75)      (93)      (75)       (93)      (93)
   Long Term       
   Borrowings  (3,734)   (3,883)   (3,734)    (3,883)   (4,024)
   Deferred Tax 
   Liability     (331)     (300)     (331)      (300)     (331)

Net Assets     90,348    20,335    90,348     20,335    20,950

Capital and                                                   
Reserves
 Called Up     1,545     1,357     1,545      1,357      1,360
 Share Capital
 Merger Reserve (605)     (609)     (605)      (609)      (605)
 Share Premium      
 Account      86,102    18,928    86,102     18,928     18,907
 Retained     
 Earnings      2,407       805     2,407        805      1,281
 Other       
 Reserves        900      (145)      900       (145)         7
                                                              
Total Equity     
Shareholders'
Funds         90,348    20,335    90,348     20,335     20,950

CASH FLOW STATEMENT

                3         3          9          9         12
              months    months     months     months    months
              30 Sep    30 Sep     30 Sep     30 Sep    31 Dec
                2000      1999       2000       1999      1999  
(All
figures     unaudited  unaudited  unaudited  unaudited audited 
GBP000s                                    
Net          
Inflow/
(Outflow) from
Operations     2,054       786      6,457      1,159    (2,877)

Returns on                                                
Investment
and Servicing
Finance
 Interest     
Receivable
/(Payable)       494        58        619       (543)     (589)

Capital      (10,824)   (3,280)   (19,746)    (7,600)   (7,413)
Expenditures

Equity        
Dividends
Paid              0          0         (0)        (0)        0
Taxes Paid       (6)      (229)       (34)      (227)     (282)
                                                          
Net          
Inflow/
(Outflow) before
Financing     (8,282)   (2,664)   (12,704)    (7,210)  (11,161)

Financing
 Issues of
 Ordinary
 Share
 Capital         47         33        185        317       319
 Proceeds of 
 Flotations  23,570         76     67,195     19,077    19,061
 Loans         (191)    (1,560)      (290)      (785)     (443)

Net           
Inflow/
(Outflow) from
Financing    23,425     (1,451)    67,089     18,609    18,937

Increase/ 
(Decrease) in
Cash and
Bank 
Overdrafts   15,143     (4,114)    54,385     11,400    7,776
       
                          
UK GAAP           
RECONCILIATIONS   
TO IAS
                 3          3          9          9        12
               months    months     months     months    months
               30 Sep    30 Sep     30 Sep     30 Sep    31 Dec
                2000      1999       2000       1999      1999
                                                              
(All figures   unaudited unaudited unaudited  unaudited audited 
GBP000s)                                             
                                                              
(1) Statement of  
Cash Flows
 
The following
shows the
statement of cash
flows as if they
had been
presented under
IAS

Cash            
Inflow/
(Outflow)
from Operations   2,594      696       7,191      885   (3,525)
Cash             
Inflow/(Outflow)
from Investing  (10,823)  (3,280)    (19,746)  (7,600)  (7,136)
Cash            
Inflow/(Outflow)
from Financing   23,367   (1,532)     66,909   18,112    18,438

Net               
Increase/
(Decrease)
in Cash and
Cash Equivalents 15,138   (4,115)     54,354   11,398     7,777

Cash and Cash                                                 
Equivalents at
the
Start of the   
Period per IAS   47,360  15,854        8,118      341       341
Exchange       
Difference            5       2           31        2         0

Cash and Cash                                                 
Equivalents at
the
End of the Period 
per IAS          62,503   11,741      62,503    11,741    8,118

(2) Goodwill

Goodwill of £284,000 arose on acquisition of Epitaxial
Products by EPIH on 27 March 1996.
Under UK GAAP, this has been written off directly to
reserves.     Under IAS, however, goodwill arising on 
acquisition should be recognized as an asset and amortized
over its useful life.    The following shows the 
retained profit and total net assets as if they had been
prepared under IAS with goodwill amortized over 5 years.
                                                        
Profit/(Loss)    
after Taxes and
Exceptional Items 574      138    1,126    367   1,342

Dividends           0        0       (0)    (0)      0

Retained          
Profit/(Loss) per
UK GAAP           574      138     1,126    367   1,342

Goodwill         
Amortization      (15)     (15)     (43)    (43)    (57)

Retained         
Profit/(Loss) per
IAS               560      123    1,084     324   1,285
                                                        
Equity  
Shareholders'
Funds per
UK GAAP        24,106     188    90,348  20,335  20,950
Goodwill          
Capitalization at
Cost               0        0       284     284     284

Accumulated      
Goodwill
Amortization     (15)     (14)     (256)   (199)   (213)
                                                        
Equity            
Shareholders'
Funds per IAS  24,092     174    90,376  20,420  21,021