3rd Quarter Results

IQE PLC
20 November 2002


IMMEDIATE RELEASE                                               20 NOVEMBER 2002


                                    IQE plc

                              3rd QUARTER RESULTS

IQE plc (IQE), the leading global outsource supplier of customised epitaxial
wafers to the semiconductor industry, presents its 3rd Quarter Results for the
period ended 30 September 2002.

Key points

•         Q3 sales were £5.607m, 12% lower than the previous quarter (Q2/2002:
£6.357m) and 32% lower than Q3 of the previous year (Q3/2001: £8.234m), mainly
due to strong pricing pressures within the sector.

•         Q3 operating loss before exceptional items and non-recurring charges
was £5.457m, 0.6% lower than the previous quarter (Q2/2002: £5.493m loss),  but
greater than Q3 of the previous year (Q3/2001 : £2.228m loss).

•         Q3 operating cash outflow was £3.598m (£2.100m prior to exceptional
costs for restructuring and legal fees). This was higher than the previous
quarter  (Q2/2002: £1.184m) as Q2 had the benefit of £1.600m debtor reduction
following resolution of two significant overdue debts. This compared with an
outflow of £1.230m in Q3/2001.

•         Gross cash at the end of Q3 was £19.949m, a reduction of £3.869m since
Q2/2002, which included repayment of £0.794m in long term borrowing.

•         Continued pick up in wireless markets, offset by further weakening in
the fibre optic communications marketplace. Continued strong interest in
Strained Silicon.

•         Significant operational improvements allowing stable contribution to
overheads despite severe pricing environment.

•         Improved competitive position with sales relatively flat through 2002
to date, compared with significantly declining sales for main competitors and
industry as a whole.

•         Resolution of long running legal dispute with Rockwell.

Commenting on the results, Dr Drew Nelson, President and CEO, said......

' Continuing difficult conditions in the semiconductor marketplace and lack of
visibility throughout the industry continued to adversely affect the Group.
However, taken against the continued contraction in the overall compound
semiconductor industry, it is clear that IQE is now taking market share from its
competitors as a result of its broad product range, clear strategic direction
and much stronger financial position.

The Group is realising significant cost savings as a result of earlier actions
and this is now resulting in reduced cash outflow, even at the low level of
current sales.   Whilst the Group remains confident that it is in a strong
position within the outsourcing market, the protection of its cash position is
paramount and the management is focussed on continual cost savings and working
capital reductions.

The Board believes that the Group will benefit strongly as the overall
semiconductor industry recovers, and will continue to strengthen its position as
the leading outsource supplier of advanced wafer products to the sector.'

For further information please contact:

Drew Nelson, President and CEO, IQE plc                           [phone]
Tim Hawkes, CFO, IQE plc                                          [phone]
Tim Thompson/Nicky Cronk, Buchanan Communications                 [phone]


3rd QUARTER  RESULTS

INTRODUCTION

Although the wireless sector continues to recover, the opto-electronic
communications sector has seen further decline with many customers' R&D budgets
and programmes being reduced or put on hold.  This continued to have a
significant adverse influence on the Group's overall sales during Q3. In
addition, there has been significant pricing pressure, particularly in the
wireless sector of the industry, to the extent that IQE produced more wafers
than in Q2 even though the sales value was lower. Group sales appear to have
stabilised around the current levels, in contrast with a number of other
companies in the sector who have continued to experience continued significant
sales declines. We believe this is as a result of the Group's increasing share
of the outsource wafer market. We are also encouraged by the number of customers
who are indicating strongly their desire to increase outsourcing as the market
returns.

Following our recent strategic review and earlier initiatives, actions were
taken which are now bearing fruit, resulting in significant cost reductions,
reduced cash outflows and a stronger competitive position. As the market
recovers, the Board believes IQE is in a strong position to be a major
beneficiary.

RESULTS

Sales in Q3/2002 were £5.607m, a 12% reduction on the preceding quarter but
slightly up on Q1/2002. This was mainly due to a further reduction in the demand
from the opto-electronic communications industry, which offset an improving
wireless marketplace.  All other areas of the business experienced similar
levels of activity to Q2. Material and labour costs within cost of sales have
been held in line with the volume of sales, but the gross margin fell to - 39.7%
(Q2/2002 -29.6%) as a result of the production overhead costs being
predominantly fixed.  These consist mainly of depreciation and facility costs.
This should improve in Q4 when the impact of the headcount reductions in IQE
Europe are realised. The establishment of the IQE Silicon Compounds business
with £15m of fixed assets now operational has increased quarterly cost of sales
from 2001 levels by £0.9m, dominated by depreciation and facility costs.

Research and Development costs in Q3/2002 were £0.525m, representing 9.4% of
sales (Q2/2002 £0.731m, 11.5%) this reduction arising mainly in IQE Europe.
Development here is now being focussed mainly on the InGaP HBT product where
short-medium term returns can be expected as qualification with a number of
customers is well underway. Cumulative spend to Q3/2002 was £2.399m (13.6% of
sales) compared with £2.898m for the same period last year (8.4%). All Research
and Development expenditure was expensed in the quarter.

SG&A costs in Q3/2002 were £2.705m, down 6.2% on the previous quarter. SG&A
costs show a significant rise from the same period last year as depreciation
related to IT, including the new company-wide ERP system and a number of
customer-related expenses have been reallocated from cost of sales. A further
component is the fact the Group was experiencing exchange gains in 2001 but has
incurred exchange losses in 2002.

As a result of the above, the Group incurred an operating loss for the quarter
before exceptional items (restructuring and legal fees) and non-recurring
charges of £5.457m compared with a loss in the previous quarter of £5.493m.
After charging net interest costs of £0.022m and exceptional items of £1.885m,
the Group operating result for the quarter was a loss before tax of £7.363m. The
restructuring costs related to the reduction in headcount, mainly in IQE Europe,
which reduced the Group headcount from 390 to 320, the beneficial impact of
which will be realised in Q4. The legal costs related to the final fees and
settlement of a dispute with Rockwell, previously shown as a contingent
liability (as discussed in more detail in the notes to the accounts).

OPERATIONS

The actions resulting from the strategic review reported at the half year are in
progress and, although there has been significant progress on the ground, they
are yet to show tangible benefits in the form of increased overall sales.
Nonetheless, IQE is considerably increasing its market share and feedback from
customers on the Group's broad product range, large production capability and
strong balance sheet has been very positive.

IQE Inc has continued to see improving conditions in their wireless business as
customer inventories have now been largely worked through and demand for
handsets and infrastructure components is improving. Internal programmes to
extend efficiency improvements and achieve cost reductions are continuing
successfully, enabling the variable costs of production to be maintained as a
percentage of the sales price, a critical achievement as the industry is
experiencing significant price reduction pressures.

The opto electronic business has continued to weaken, with R&D budgets and other
programmes being reduced or delayed, although optical storage related components
and High Efficiency LED areas remain relatively buoyant.  IQE is currently
transitioning products and technologies into these areas, both in the epitaxy
and substrate divisions.

There is continued strong interest in strained silicon and IQE's partner,
Amberwave, recently reported the capability to make a
strained-silicon-on-insulator (SSOI) product. This employs the current strained
silicon wafer technology as a foundation and combines it with an insulator using
industry standard techniques. This provides a clear route to the most advanced
silicon wafer technology, already seen as essential for next generation
technologies.  An increasing number of customers are now evaluating the strained
silicon product.

TRADING PROSPECTS

The outlook for the remainder of 2002 and the first half of 2003 continues to
look very challenging, and sales are not expected to increase rapidly. However,
the Group has achieved a number of operational efficiencies which have enabled
IQE to take market share without materially increasing the variable cost
percentage of sales. This has allowed the Group to offer customers attractive
pricing without prejudicing the financial position of the business. Summarising
the key aspects of the business at present:

•         The Group has a strong balance sheet to take it forward, with net
assets of £73.6m, consisting of tangible assets of £62.5m, cash of £19.9m and
long-term liabilities of just £8.6m.

•         The Group has made significant cost savings, such that contribution on
sales has been maintained at a level of 40%, whilst ensuring that the group is
well positioned to respond rapidly to increased sales demands.

•         The Group has continued to invest in new product development, with
main focus on products offering short to medium term paybacks.

•         The Group has completed its planned capacity expansion to a level
capable of producing up to £120m sales revenue through investment in the
purchase, installation and run-up of significant capital assets.  As the Group
continues to increase market share, incremental sales will have a significant
positive impact on profitability and cash position.

•         The Group remains confident that it is in a strong position within the
outsourcing market, although the protection of its cash position is paramount.
Management is focussed on continual cost-savings and working capital reductions
along with reviewing strategic relationships that could benefit the Group.

With a broad product portfolio allowing the customer base to use IQE as a 'one
stop shop', a large available production capacity and a strong balance sheet,
the Board believes the Group will benefit strongly as the overall semiconductor
industry recovers and will continue to strengthen its position as the leading
outsource supplier of advanced wafer products to the sector.



Dr Drew Nelson,
President and Chief Executive Officer
IQE plc

20 November 2002



IQE PLC
ACCOUNTS FOR 9 MONTHS TO SEPTEMBER 2002

                                                3 months     3 months    9 months     9 months   12 months
                                                      to           to          to           to          to
PROFIT AND LOSS ACCOUNT                Note  30 Sep 2002  30 Sep 2001 30 Sep 2002  30 Sep 2001 31 Dec 2001

(All figures GBP000s)                          unaudited    unaudited   unaudited    unaudited     audited

Turnover                                           5,607        8,234      17,644       34,351      42,047
Cost of Sales                                     (7,833)      (6,932)    (34,919)     (24,585)    (32,381)

Gross Profit/(Loss)                               (2,226)       1,302     (17,275)       9,766       9,666
Gross Profit/(Loss) %                              (39.7)        15.8       (97.9)        28.4        23.0

S G and A Costs :

    Research/Development                            (525)      (1,602)     (2,399)      (2,898)     (3,792)
    Selling/General/
    Administration                                (2,705)      (1,928)     (8,673)      (6,540)     (9,341)

Operating Profit/(Loss) before
Goodwill/Exceptionals                             (5,457)      (2,228)    (28,347)         328      (3,467)
Operating Profit/(Loss) % before
Goodwill/Exceptionals                              (97.3)       (27.1)     (160.7)         1.0        (8.2)

Goodwill Written off                       2          (0)        (452)    (34,302)      (1,363)     (1,835)
Exceptional Items                          3      (1,885)        (233)     (2,775)        (506)       (759)

Operating Profit/(Loss) after                     (7,341)      (2,913)    (65,424)      (1,541)     (6,061)
Goodwill/Exceptionals
Operating Profit/(Loss) % after                   (130.9)       (35.4)     (370.8)        (4.5)      (14.4)
Goodwill/Exceptionals

Interest Received/(Paid)                             (22)         (98)        (10)         320         211

Net Profit/(Loss) before Taxes                    (7,363)      (3,011)    (65,434)      (1,221)     (5,850)
Net Profit/(Loss) %                               (131.3)       (36.6)     (370.9)        (3.6)      (13.9)

Current Taxes                                          0          635          (0)         315       (103)
Deferred Taxes                                         0            0          (0)        (267)       373
Dividends                                              0            0          (0)          (0)        (0)

Net Profit/(Loss) after Taxes                     (7,363)      (2,375)    (65,434)      (1,173)    (5,580)

Basic Earnings Pence/Share                         (3.98)       (1.45)     (35.36)       (0.72)     (3.38)
Basic Earnings Pence/Share excl                    (3.98)       (1.17)     (16.82)        0.12      (2.27)
Goodwill
Diluted Earnings Pence/Share               5       (3.98)       (1.41)     (35.36)       (0.70)     (3.38)
Diluted Earnings Pence/Share excl
Goodwill                                   5       (3.98)       (1.14)     (16.82)         0.11     (2.27)
Net Profit/(Loss) before Interest/
Taxes/
Depreciation and Amortization                     (4,665)        (547)    (16,032)        4,791     2,196
(EBITDA)
                                                  


IQE PLC

ACCOUNTS FOR 9 MONTHS TO SEPTEMBER 2002

                                     3         3           3           3         9          9          9         9 
                                months    months      months      months    months     months     months    months
                                    to        to          to          to        to         to         to        to
PROFIT AND LOSS     Note        30 Sep    30 Sep      30 Sep      30 Sep    30 Sep     30 Sep     30 Sep    30 Sep
ACCOUNT ANALYSIS                  2002      2002        2002        2001      2002       2002       2002      2001

                                              non                                         non
(All figures GBP000s)        recurring  recurring      total       total recurring  recurring      total     total

Turnover                         5,607          0       5,607     8,234       17,734       (90)     17,644    34,351
Cost of Sales                   (7,833)         0      (7,833)   (6,932)     (22,964)  (11,955)    (34,919)  (24,585)

Gross Profit/(Loss)             (2,226)         0      (2,226)    1,302       (5,230)  (12,045)    (17,275)    9,766
Gross Profit/(Loss) %            (39.7)                 (39.7)     15.8        (29.5)                (97.9)     28.4

S G and A Costs :
   Research/
   Development                    (526)         0        (526)   (1,602)      (2,399)        0      (2,399)   (2,898)
   Selling/General
   /Administration              (2,705)         0      (2,705)   (1,928)      (8,208)     (465)     (8,673)   (6,540)

Operating Profit/(Loss)
before Goodwill/Exceptionals    (5,457)         0      (5,457)   (2,228)     (15,837)  (12,510)    (28,347)      328
Operating Profit/(Loss) %
before Goodwill/Exceptionals     (97.3)                 (97.3)    (27.1)       (89.3)               (160.7)      1.0

Goodwill Written off      2         (0)         0          (0)     (453)        (891)  (33,411)    (34,302)   (1,363)
Exceptional Items         3     (1,885)         0      (1,885)     (232)      (2,775)        0      (2,775)     (506)

Operating Profit/(Loss)
after Goodwill/Exceptionals     (7,341)         0      (7,341)   (2,913)     (19,503)  (45,921)    (65,424)   (1,541)

Operating Profit/(Loss) %
after Goodwill/Exceptionals     (130.9)                (130.9)    (35.4)      (110.0)               (370.8)     (4.5)

Interest Received/(Paid)           (22)         0         (22)      (98)         (10)        0         (10)      320

Net Profit/(Loss) before
Taxes                           (7,363)         0      (7,363)   (3,011)     (19,513)  (45,921)    (65,434)   (1,221)
Net Profit/(Loss) %             (131.3)                (131.3)    (36.6)      (110.0)               (370.9)     (3.6)

Current Taxes                       (0)         0          (0)      636           (0)        0          (0)      315
Deferred Taxes                      (0)         0          (0)       (0)          (0)        0          (0)     (267)
Dividends                           (0)         0          (0)       (0)          (0)        0          (0)       (0)

Net Profit/(Loss) after
Taxes                           (7,363)         0      (7,363)   (2,375)     (19,513)  (45,921)    (65,434)   (1,173)

Basic Earnings Pence/
Share                            (3.98)                 (3.98)    (1.45)      (10.57)               (35.43)    (0.72)
                                
Basic Earnings Pence/Share
excl Goodwill                    (3.98)                 (3.98)    (1.17)      (10.08)               (16.86)     0.12
                                 
Diluted Earnings Pence/
Share                      6     (3.98)                 (3.98)    (1.41)      (10.57)               (35.43)    (0.70)
                           
Diluted Earnings Pence/
Share excl Goodwill        6     (3.98)                 (3.98)    (1.14)      (10.08)               (16.86)      0.11

Net Profit/(Loss) before
Interest/Taxes/
Depreciation and
Amortization (EBITDA)           (4,665)         0      (4,665)     (324)     (12,114)    (3,918)   (16,032)     4,791
                               


BALANCE SHEET                                                     As At      As At     As At
                                 Note                            30 Sep     30 Sep    31 Dec
                                                                   2002       2001      2001

(All figures GBP000s)                                         unaudited  unaudited   audited

Fixed Assets :
   Intangible Fixed Assets                                            0     34,768    34,658
   Tangible Fixed Assets                                         62,512     72,246    74,193
   Investment in Own Shares                                          10          0         3
   Capitalized Research and
   Development                                                        0        250         0
                                                                      
   Total Fixed Assets                                            62,522    107,264   108,854

Current Assets :
   Stocks                                                         5,938     13,858    12,277
   Debtors                                                        5,019     10,554     7,495
   Cash and Bank                                                 19,949     13,513    30,532
   Total Current Assets                                          30,905     37,926    50,304

Creditors Falling Due within
One Year                                                        (11,415)   (16,597)  (11,945)

Net Current Assets                                               19,490     21,329    38,359

Total Assets less Current                                        82,011    128,593   147,213
Liabilities

Creditors Falling Due after
One Year :
   Deferred Income                                                 (63)       (51)      (173)
   Deferred Tax Liability                                       (1,215)    (1,857)    (1,217)
   Long Term Borrowings                                         (7,313)   (10,636)    (8,211)

Net Assets                                                       73,420    116,048   137,612


Capital and Reserves :
   Called Up Share Capital                                        1,867      1,644     1,824
   Merger Reserve                                                 (605)      (605)      (605)

   Share Premium Account                                        140,301    111,882   136,661
   Shares to be Issued                                               91        575       938
   Retained Earnings                                           (67,924)      1,917    (2,490)
   Other Reserves                                                 (310)        635     1,284

Total Equity Shareholders'                                       73,420    116,048   137,612
Funds


The financial statements were approved by the Directors of IQE plc on 
19 November 2002

JL COVENTRY
Company Secretary



CASH FLOW STATEMENT                                                                                                  
                                                                                            12                    
                                      3 months   3 months    9 months   9 months        months    
                                            to         to          to         to            to
                               Note     30 Sep     30 Sep      30 Sep     30 Sep        31 Dec
                                          2002       2001        2002       2001          2001
(All figures GBP000s)                unaudited  unaudited   unaudited  unaudited       audited

Net Inflow/(Outflow) from
Operations                             (3,598)    (1,230)     (8,029)    (2,550)        (7,066)

Returns on Investment and
Servicing Finance :
   Interest Received/(Paid)               (22)       (98)        (10)        320           211

Capital Expenditures :
   Purchases of Fixed Assets
   less Leases Received                   429     (3,475)     (3,189)    (22,386)      (25,169)
   Payments to Acquire
   Investments in Subsidiaries              0          0           0           0             0

   Capitalized Development
   Costs                                    0          0          (0)       (250)            0

Dividends Received/(Paid)                   0          0           0           0             0

Taxes Received/(Paid)                       0       (102)        (58)        288           322

Net Inflow/(Outflow) before
Financing                              (3,191)    (4,904)    (11,286)    (24,578)      (31,702)

Financing :
   Issues of Ordinary Share
   Capital                                116         11       3,194          91        25,049
   Loans Received/(Repaid)               (148)       (15)       (588)       (195)         (463)
   Leases (Repaid)                       (646)    (1,284)     (1,903)     (1,317)       (1,863)

Net Inflow/(Outflow) from
Financing                                (678)    (1,288)        703      (1,421)       22,723

Increase/(Decrease) in Cash
and
Bank Overdrafts                        (3,869)    (6,193)    (10,583)    (25,999)       (8,979)



RECONCILIATION OF PROFIT TO CASH                                                                                        
                                                                                            12
                                        3 months   3 months    9 months   9 months      months
                                              to         to          to         to          to
INFLOW/(OUTFLOW) FROM            Note     30 Sep     30 Sep      30 Sep     30 Sep      31 Dec
OPERATIONS                                  2002       2001        2002       2001        2001

(All figures GBP000s)                  unaudited  unaudited   unaudited  unaudited     audited

Operating Profit after                    (7,341)    (2,913)    (65,424)    (1,541)     (6,061)
Goodwill/Exceptionals

Depreciation Charged                       2,676      2,137      15,089      4,970       6,422
Goodwill Written off                           0        452      34,302      1,363       1,836
(Gain)/Loss on Sale of Fixed
Assets                                         0          0           0          0           0
                                               
(Increase)/Decrease in Stocks              1,043       (976)      6,339     (5,973)     (4,392)
(Increase)/Decrease in
Debtors                                     (206)     3,097       2,476       (243)      2,882
                                           
Increase/(Decrease) in
Creditors                                    268     (3,021)       (702)    (1,107)     (7,857)
                                             
Grants Released                              (39)        (6)         70        (18)       (504)
Grants Received                                0          0        (180)         0         608

Net Cash Inflow/(Outflow)
from Operations                           (3,598)    (1,230)     (8,029)    (2,550)     (7,066)
                                         






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