Final Results - Part 2

IQE PLC
21 March 2001

PART 2                                  

                            IQE plc
            Quarter Four and Full Year 2000 Results                            
 
               Record Sales, Profits and Orders
IQE PLC                                              
                                3       3         12       12
                             months   months     months  months
PROFIT AND LOSS ACCOUNT      31 Dec  31 Dec note 31 Dec  31 Dec
                               2000    1999       2000    1999
(All figures GBP000s)                                                          
         

Sales                       10,478   5,068      30,117  19,043
Cost of Sales               (6,826) (3,295)    (19,785)(12,558)

Gross Profit                 3,652   1,773      10,332   6,485
Gross Profit %                34.9    35.0        34.3    34.1

S G and A Costs                                                   
   Research/Development       (457)   (309)     (1,870) (1,302)
   Selling/General/Admin    (2,291) (1,152)     (6,392) (3,729)
   Selling/General/Admin        105     (0)   2    (75)   (171)
   Exceptional

Operating Profit/(Loss)       1,008     312      1,995   1,283
before Goodwill
Operating Profit/(Loss) %       9.6     6.2        6.6     6.7                 
                                                 

Interest 
   Interest Received/(Paid)     589    (46)      1,208    (261)
   Interest Received/(Paid)      (0)     0          (0)   (328)
  Exceptional
Goodwill written off           (209)    (0)       (209)     (0)

Net Profit/(Loss) before      1,388     266        2,994   694
Taxes/Exceptionals
Net Profit/(Loss) %            13.2     5.2          9.9   3.6

Current Taxes                   555     214    3      75    13
Deferred Taxes               (1,259)     (4)   3  (1,259)  135
Dividend                         (0)     (0)          (0)   (0)
                                                                  
Net Profit/(Loss) after         684     476        1,810   843
Taxes/Exceptionals

Basic Earnings Pence/Share                          1.24  0.63
Basic Earnings Pence/Share                          1.38  0.63
excl Goodwill
Diluted Earnings                                    1.18  0.59
Pence/Share
Diluted Earnings                                    1.32  0.59
Pence/Share excl Goodwill

Net Profit/(Loss) before                                          
Interest/Taxes/
Depreciation and              2,024     789        4,832 2,793
Amortization (EBITDA)
Sales from New Acquisitions     989       0          989     0
Operating Profit/(Loss)         283       0          283     0
from New Acquisitions

                                                 As At    As At
BALANCE SHEET                            note   31 Dec   31 Dec
                                                  2000     1999
(All figures GBP000s) 

Fixed Assets
   Intangible Fixed Assets                 4    36,542        0
   Tangible Fixed Assets                        47,848   11,483
   Total Fixed Assets                           84,390   11,483

Current Assets                                                    
   Stocks                                        7,885    2,573
   Debtors                                      10,311    7,742
   Cash and Bank                                39,512    8,117
   Total Current Assets                         57,708   18,432

Creditors Falling Due                          (17,406)  (4,517)
within One Year

Net Current Assets                              40,302   13,914

Total Assets less Current                      124,693   25,397
Liabilities

Creditors Falling Due 
after One Year
   Deferred Income                                 (69)     (93)
   Deferred Tax Liability                       (1,590)    (331)
   Long Term Borrowings                         (5,438)  (4,024)

Net Assets                                     117,596   20,949

Capital and Reserves                                              
   Called Up Share Capital                       1,633    1,360
   Merger Reserve                                 (605)    (605)
   Share Premium Account                       111,802   18,907
   Shares to be Issued                             988        0
   Retained Earnings                             3,090    1,281
   Other Reserves                                  688        7

Total Equity Shareholders'                     117,596   20,949
Funds

The financial statements                                          
were approved by the Directors of IQE plc on 20 March 2001

JL COVENTRY                                                     
Company Secretary

                             3         3        12       12
                          months    months     Months   Months
CASH FLOW STATEMENT       31 Dec  31 Dec note  31 Dec   31 Dec
                            2000     1999       2000     1999

(All figures GBP000s)

Net Inflow/(Outflow) from  4,492   (4,036)    10,949   (2,877)
Operations

Returns on Investment and
Servicing Finance
   Interest                  589      (46)     1,208     (589)
  Received/(Paid)

Capital Expenditures                                              
   Purchases of Fixed    (13,820)     187    (33,566)  (7,413)
  Assets
   Investment in         (13,968)      0     (13,968)       0
  Subsidiaries less Cash

Equity Dividends Paid         (0)     (0)         (0)      (0)
                                                                  
Taxes Paid                  (110)    (56)       (144)    (282)

Net Inflow/(Outflow)     (22,817) (3,950)    (35,520) (11,160)
before Financing

Financing                                                         
   Issues of Ordinary        (23)    (13)     67,356   19,381
  Share Capital
   Loans Received/(Repaid)  (151)    341        (441)    (444)
                                                                  
Net Inflow/(Outflow) from   (174)    328      66,915   18,937
Financing
 
Increase/(Decrease) in                                            
Cash and
Bank Overdrafts          (22,991) (3,623)     31,395    7,776

RECONCILIATION OF PROFIT                          12       12
TO                                            Months   Months
CASH INFLOW FROM OPERATIONS            note   31 Dec   31 Dec
                                                2000     1999

(All figures GBP000s) 

Operating Profit                               1,786    1,283
                                                                  
Depreciation                                   2,839    1,509
Goodwill                                         209        0
Loss on Sale of Fixed                             29        0
Assets
(Increase)/Decrease in                        (4,013)    (982)
Stocks
(Increase)/Decrease in                        (1,157)  (4,852)
Debtors
Increase/(Decrease) in                        11,280       81
Creditors
Grants Released                                  (24)     (29)
Grants Received                                    0      112

Net Cash Inflow/(Outflow)                     10,949   (2,877)
from Operations
                                                                  

RECONCILIATION OF NET CASH FLOW                    12       12
                                               Months   Months
TO MOVEMENT IN NET FUNDS                note   31 Dec   31 Dec
                                                 2000     1999
(All figures GBP000s)                                             

Increase/(Decrease) in                         31,395    7,776
Cash

Loans                                                             
   Loans Repaid                                   441    3,611
   Loans Received                                  (0)  (2,908)

Change in Funds Resulting                      31,836    8,479
from Cash Flows

New Finance Leases                             (2,590)    (124)

Net Movement                                   29,246    8,355
Net Funds at Start                              3,572   (4,648)
Exchange Differences                               (5)    (135)

Net Funds at Close                             32,813    3,572

Analysis of Net Funds                                             
   Cash and Bank                               39,512    8,117
   Debt Due after One year                     (3,526)  (3,943)
   Debt Due within One year                      (508)    (504)
   Finance Leases                              (2,664)     (99)

   Total                                        32,813    3,572
                                                                  
 
                                 3       3          12       12
                              Months  Months      Months Months
RECONCILIATION OF UKGAAP TO   31 Dec  31 Dec note 31 Dec 31 Dec
IAS                             2000    1999       2000   1999

(All figures GBP000s)                                             

(1) Statement of Cash Flows                                       
The following shows the                                           
statement of cashflows as if
they had been
presented under IAS                                              
                                                                  
Cash Inflow/(Outflow) from     3,192 (4,961)    10,383  (4,076)
Operations
Cash Inflow/(Outflow) from   (26,158)   514    (45,904) (7,086)
Investing                          
Cash Inflow/(Outflow) from         7    826     66,916   18,938
Financing

Net Increase/(Decrease) in                                        
Cash and Cash Equivalents    (22,959)(3,621)    31,395    7,776

Opening Cash and Cash         62,503 11,740      8,117      341
Equivalents per IAS
Exchange Difference              (31)    (2)         0        0

Closing Cash and Cash         39,513  8,117     39,512    8,117
Equivalents per IAS

(2) Goodwill 
Goodwill of £284,000 arose
on acquisition of IQE
(Europe) 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        684     476     1,810      843
and Exceptionals
Dividends                         (0)     (0)       (0)      (0)
Retained Profit/(Loss) per       684     476     1,810      843
UK GAAP
Goodwill Amortization            (14)    (14)      (57)     (57)

Retained Profit/(Loss) per       670     462     1,753      786
IAS

Equity Shareholders' Funds    27,248     613   117,596   20,949
per UK GAAP
Goodwill Capitalization at         0       0       284      284
Cost
Accumulated Goodwill             (14)    (14)     (270)    (213)
Amortization

Equity Shareholders' Funds    27,234     599   117,610   21,020
per IAS
                                            

NOTES TO THE ACCOUNTS

1 BASIS OF PREPARATION

The financial statements are prepared in accordance with
applicable accounting standards under UK GAAP.

The particular accounting policies adopted are described below :

*The  financial  information is prepared under the  historical
cost  convention and in accordance with applicable  accounting
standards,  which  have  been applied on  a  consistent  basis
during the year under review.

*Turnover represents amounts invoiced exclusive of value added
taxation.

Tangible  fixed  assets  are stated at cost  less  accumulated
depreciation.   Cost  comprises all costs  that  are  directly
attributable to bringing the asset into working condition  for
its  intended use, as defined by Financial Reporting  Standard
Number 15.    Depreciation has been calculated so as to  write
down the cost of assets to their  residual  values  over the
following  estimated  useful economic lives :

                                                                  
 Freehold buildings                               25   years
 Short leasehold  improvements                    5/27 years
 Plant and machinery                              4/5  years
 Fixtures and fittings                            4/5  years
 Motor vehicles                                   4    years
                                                                  
 No depreciation is provided on land or assets in the             
 course of construction.
 
*The financial information consolidates the financial
 statements of the Company and all of its subsidiaries.

 The  acquisition of IQE (Europe) Limited  (formerly known  as
 Epitaxial Products International Limited) and  its subsidiary
 Epitaxial Products Inc on 27 March 1996 by EPI Holdings
 Limited, a  new company established for that purpose,
 has been accounted for under acquisition accounting, 
 whereby these Companies became part of the Group on the
 date of acquisition.

The acquisition of EPI Holdings Limited and IQE Inc (formerly
Quantum Epitaxial Designs Inc) on 16 May 1999 by IQE plc, a new
holding  company  established for that  purpose, has  been
accounted for under merger accounting, whereby the financial
information is disclosed as if the companies had always  been
part of the same Group.

The acquisition of Wafer Technology International Limited and
its subsidiary Wafer Technology Limited on 22 November 2000 by
IQE  plc  has been accounted for under acquisition accounting,
whereby  these companies became part of the Group on the  date
of acquisition.

On the acquisition of a business, fair values are attributed
to  the Group's share of the net tangible  assets  acquired.
Where  the  cost of  the  acquisition  exceeds  the   values
attributable to such net assets, the difference is treated as
purchased goodwill.  The goodwill arising on the acquisition
of IQE (Europe)   Limited  (formerly  Epitaxial   Products
International Limited) and its subsidiary Epitaxial  Products
Inc  by  EPI  Holdings Limited was  written  off  directly  to
reserves  in  the year of acquisition.  Goodwill of £284,000
remains eliminated in the profit  and loss reserve and will be
charged  to the  profit  and loss acount  on  the  subsequent
disposal of IQE (Europe) Limited and Epitaxial Products Inc.

Following the  issue  of  Financial  Reporting  Standard  10,
goodwill arising in accounting periods ending on or after  23
December 1998 must be classified as an asset on  the  balance
sheet and amortized over its useful life

The goodwill arising on the acquisition of Wafer  Technology
International Limited  and  its subsidiary  Wafer  Technology
Limited has been capitalized and is being amortized over  its
useful life, which is considered by the Directors  to  be  20
years.

Stocks are  stated  at the lower of cost and  net  realizable
value.

Research and development expenditure is fully written off when
incurred.

Transactions  in  foreign  currencies  during  the  year   are
recorded in sterling at the rates ruling at the dates  of  the
transactions.    Monetary  assets and liabilities  in  foreign
currencies are translated into sterling at the rates ruling at
the  balance sheet date.   All exchange differences are  taken
to the profit and loss account.

The  balance  sheets  of IQE Inc (formerly  Quantum  Epitaxial
Designs Inc) are translated into sterling at the closing rates
of  exchange for the year, while the profit and loss  accounts
are  translated into sterling at the average rates of exchange
for  the  year.    The resulting translation  differences  are
taken direct to reserves.

The  Group  operates  a defined contribution  pension  scheme.
Contributions  are charged in the profit and loss  account  as
they  become  payable  in accordance with  the  rules  of  the
scheme.

Deferred  taxation is provided on timing differences,  arising
from  the  different  treatment of items  for  accounting  and
taxation purposes, which are expected to reverse in the future
without  replacement, calculated at the rates at which  it  is
expected that will arise.

Government grants receivable in connection with expenditure on
tangible  fixed assets are accounted for as  deferred  income,
which   is  credited  to  the  profit  and  loss  account   by
instalments  over the expected useful  economic  life  of  the
related  assets  on a basis consistent with  the  depreciation
policy.

Revenue  grants  for the reimbursement of costs  incurred  are
deducted from the costs to which they related, in the year  in
which the costs are incurred.

Assets  held under finance leases and hire purchase  contracts
are  capitalized at their fair value on the inception  of  the
leases  and depreciated over the shorter of the period of  the
lease  and the estimated useful economic lives of the  assets.
The finance charges are allocated over the period of the lease
in  proportion  to  the  capital amount  outstanding  and  are
charged to the profit and loss account.

Operating  lease  rentals are charged to the profit  and  loss
account in equal amounts over the lease term.

The only derivative instruments utilized by the Group are
forward exchange contracts.  The Group does not enter  into
speculative derivative contracts.   Forward exchange contracts
are used for hedging purposes to alter the risk profile of an
existing underlying exposure of the Group in line with the
Group's risk management policies.

2 EXCEPTIONAL ITEMS                                                
                                                                  
  Exceptional items comprise:                                               
                                                                  
  Merger costs                               £0K (1999 : £171K)
  Provision for national insurance 
  contributions on share options             £75K(1999:  £0K)
                                                                  

3TAXATION                                                         
                                                                  
 The effective tax rate for the Group is 40% (1999: tax credit).
 This high rate was due to unrelieved taxlosses arising in the US
 operations.
                                                                  

4 INTANGIBLE FIXED ASSETS                                        
                                                                 
  100% of the issued share capital of Wafer Technology Limited
  and Wafer Technology International Limited was acquired on 22
  November 2000 for a consideration of £41,301K.  This has been
  accountedfor using the acquisition method of accounting.
                
                                                                 
5 SHARE OPTIONS                                                  
                                                                 
  The number of outstanding share options at 31 
  December 2000 was :                9,578082  (1999:10,380,990)               
        
                                                                 
                                                                 
6 CAPITAL COMMITMENTS                                            
                                                                 
  The value of capital commitments at 31 December 
  2000 was :                         £16,690K  (1999 :£14,653K)                
            

7 AUDIT                                                          
                                                                 
  The financial information set out in the announcement does
  not constitute the Company's statutory accounts for
  the years ended 31  December  1999  and  31  December  2000.
  The  financial information  for  the  year  ended 1999  is
  derived  from  the  statutory  accounts for that year
  which have been delivered  to the  Registrar of Companies. 
  The auditors  reported on  those accounts  ; their report 
  was unqualified and did not contain  a  statement under
  s237(2) or (3) of theCompanies Act 1985.
                                 
                                                                 
  The statutory accounts for the year ended 31 December 2000
  will  be   finalized  on  the  basis  of  the  financial 
  information presented  by  the Directors in this preliminary
  announcement,  and  will  be delivered to the Registrar of
  Companies following the Company's Annual General Meeting.
  The  accounts for the quarter ended 31 December 2000 have
  not been audited.