Final Results

ARC International Plc
                  

ARC International plc Announces Preliminary Results for the Year Ended 31
December 2004; Record Growth in Processor Licenses Drives Highest Annual Revenue

ARC International (LSE:ARK), the world leader in configurable CPU/DSP processor
cores and application subsystems, today announces its unaudited financial
results for the six months and full year ended 31 December 2004.

Highlights:

Six months ended 31 December 2004:

    --  Turnover up 9% in sterling and 20% in dollars: GBP6.0 million ($10.9
        million) up from GBP5.5 million ($9.1 million) in 2H 2003

    --  Operating costs before share based award expense, exceptional items,
        amortisation and depreciation GBP8.0 million: reduced by 39% over 2H
        2003 (2H 2003: GBP13.1 million)

    --  Pre-exceptional net loss GBP3.0 million: improved 72% over 2H 2003 (2H
        2003: GBP10.7 million)

    --  Net loss for the period of GBP1.8 million, improved 88% over 2H 2003 (2H
        2003: GBP14.9 million)

    --  Operating cash outflow of GBP3.2 million: reduced 60% year over year (2H
        2003: GBP8.0 million); year end cash at GBP34.1 million

    --  Received additional proceeds of GBP0.5 million from the sale of USB
        business

    --  21 new processor licenses signed, including 10 new licenses for the
        ARC(TM) 600 and ARC 700 cores

Twelve months ended 31 December 2004:

    --  Turnover up 13% in sterling and 26% in US Dollars: GBP12.2 million
        ($22.2 million) up from GBP10.7 million ($17.6 million) in 2003

    --  Operating costs before share-based award expense, exceptional items,
        amortisation and depreciation GBP18.4 million: reduced 32% (2003:
        GBP27.1 million)

    --  Pre-exceptional net loss of GBP7.0 million: improved 66% on prior year
        (2003: GBP20.7million)

    --  Net loss for the period of GBP5.1, improved 79% over 2004 (2004: 24.6
        million)

    --  Net cash outflow of GBP3.1 million: reduced 80% (2003: GBP15.7 million,
        excluding share buyback)

    --  Sale of USB business to TransDimension Inc completed in June 2004;
        received total cash proceeds of GBP3.1 million and recognized a net gain
        of GBP2.6 million

    --  32 new processor licenses signed, increasing the total system-on-chip
        (SoC) customers to 96

Commenting on the results, Carl Schlachte, President and Chief Executive
Officer, said:

"2004 was a successful year for ARC International, and one that marked a
significant turnaround for the company. Record revenues were driven by strong
demand for multi-use and core family licenses of our configurable processors. We
sold fifteen new licenses for the recently introduced ARC 600 and ARC 700 cores,
and our overall base of licensees grew to 96 companies.

"During 2005, we intend to expand our global customer base and deepen partner
relationships to help further increase revenues. Additional application-specific
subsystems currently in development will strengthen our competitive advantage
and grow ARC's share of design starts in high-volume consumer markets."

Commenting on the financial results, Monica Johnson, Chief Financial Officer,
added:

"In the second half of 2004, turnover from ongoing operations grew 62 percent in
US Dollars from the first half of 2004, as licensing revenue from our SoC
product line reached an all-time high. Operating costs (before share based award
expense, exceptional items, amortisation and deprecation) reduced 39 percent as
our net loss narrowed to GBP1.8 million during the second half of 2004. Moving
forward, we will maintain cost controls while continuing to ensure ARC's
competitive position within the semiconductor IP industry."

Statement from the President and Chief Executive Officer:

Overview

For 2004, ARC International posted strong financial and operating results and
grew at more than twice the rate of the overall semiconductor market. Our SoC
product line drove ARC's results with 32 new processor licenses. Today we are
close to adding our 100th SoC customer, which will be a major company milestone
and one that few semiconductor IP companies have achieved in such a short period
of time.

The strategic redirection announced last year is complete, including the sale of
the peripherals business and reduction in overhead costs. These changes reduced
2004 operating costs (before share based award expense, exceptional items,
amortisation and depreciation) by 32% over 2003 and narrowed our net loss to
GBP5.1 million, an improvement of 79%. Cash usage in 2004 decreased
significantly to GBP3.1 million. Simultaneously, by focusing on core
competencies and strategically partnering with select companies, ARC
strengthened its product portfolio with two new processors and the ARCsound(TM)
subsystem.

SoC Solutions

The SoC business grew its contribution to ARC's overall revenue and represented
79% of turnover in 2004. Three new products -- the ARC 600 and ARC 700 cores and
the ARCsound subsystem -- delivered on our promise to address a greater part of
our customers' SoC design challenges. The two processor core families are the
foundation of our future CPU and DSP product roadmaps, and are helping ARC
further penetrate high-growth markets while diversifying its SoC customer base.

The ARC 700 core extends our reach into high-end, operating system-based devices
such as digital televisions and digital set-top boxes. It offers best-in-class
performance at the industry's smallest die size. This reduces our customers'
end-product costs, making their ARC-Based(TM) products more competitive in the
digital consumer marketplace.

The ARCsound subsystem has created a new technology category within the
semiconductor IP space. It is the first configurable, application-specific
platform for audio-intensive consumer devices. Our first customer was signed
just six weeks after the product was introduced, a rarity in the IP market and a
positive sign of the technology's appeal to customers. Moving forward, ARC's
subsystem strategy will be the basis for our strategic R&D investments. We will
add other optimized subsystems that focus on key areas of the high-growth
digital consumer market.

Embedded Systems Software

ARC's second operational product line provides embedded operating systems and
development tools. During the past twelve months, the Embedded Systems Business
Unit (ESBU) contributed 21% percent of total revenue. We continue to assess the
overall strength of this business and the leverage it provides on our core
processor business.

Customers

During 2004, the digital consumer electronics market was the key driver of
design starts within the semiconductor industry. Key factors for success in this
market are the abilities to lower the end product cost, maximize differentiation
and speed time-to-market parameters. As the leader in configurable technology,
ARC's CPU, DSP and application-specific subsystems meet these design
requirements. Key customers who joined the ARC team included:

    --  Broadcom -- one of the world's leading semiconductor companies, signed a
        comprehensive licensing agreement that included the ARC 600 and ARC 700
        cores and MetaWare(R) development tools. Broadcom will use its ARC
        licenses to develop leading-edge SoCs for high-growth consumer
        applications.

    --  Conexant -- announced its license for a configurable ARC processor core
        for use in the company's multi-function peripheral products. Conexant
        provides solutions for broadband communications, enterprise networks and
        the digital home.

    --  Digeo -- a leading provider of media center software and services, took
        a license for the ARC 600 core and ARC's MetaWare tools for use in its
        media center chipset. Digeo's X-Stream(TM) Chipset features the
        industry's highest level of integration and dramatically cuts costs for
        media center devices. X-Stream combines the functions of over two-dozen
        chips onto one device, resulting in power and space savings as well as
        increased reliability.

    --  Fujitsu Microelectronics Europe -- announced it standardized upon ARC's
        technology for next generation consumer applications. Already an ARC
        licensee, the announcement of a license for an ARC 700 core signals a
        deepening relationship with Fujitsu Microelectronics Europe. It also
        underscores the increasing number of industry leaders that are
        leveraging ARC's configurable cores for high-volume applications.

    --  Infineon Technologies -- strengthened its commitment to ARC by taking a
        license for an ARC 700 processor core for wireless access applications.
        Since 2001, Infineon has relied upon ARC for a range of consumer
        networking products. By upgrading to the ARC 700 technology, Infineon's
        designers can create SoCs that simultaneously perform the functions of
        host and applications processing in a single core. This will greatly
        reduce overall design complexity and silicon cost.

    --  LeapFrog Enterprises -- a provider of award-winning learning systems,
        announced it has taken a license for an ARC processor to develop chips
        for the company's Leapster(TM) multimedia device. Announced in October
        2003, Leapster was named one of the hottest toys for Christmas according
        to industry experts.

    --  QPixel -- a Silicon Valley company, selected the ARCsound audio
        subsystem to develop a fully integrated H.264 audio/video chip. Qpixel's
        design requires an extremely efficient audio platform to deliver the
        highest audio fidelity without consuming large amounts of system power
        or silicon area. The ARCsound subsystem meets these challenges and
        easily integrates with Qpixel's video technology, accelerating their
        time-to-market parameters.

    --  SanDisk -- the world's largest supplier of flash storage products,
        purchased a license for the ARC 600 processor core and MetaWare
        development tools for use in their next generation of flash storage
        products. SanDisk designs, manufactures and markets digital imaging and
        audio storage products using its patented high density flash memory and
        controller technology. These products are sold under the SanDisk label
        and by OEMs for use in products ranging from portable music players and
        digital cameras to smart phones and handheld computers.

    --  Siano Mobile Silicon -- a provider of innovative technology to the
        mobile digital TV marketplace, has taken a license for a configurable
        ARC 610D processor core with ARC's XY Advanced DSP subsystem. Siano
        Mobile Silicon will use its ARC license to develop a new SMS1000 mobile
        digital TV receiver chip, which is scheduled for introduction later this
        year and is targeted at a range of products delivering mobile TV
        services to consumers.

    --  Tektronix -- a leading worldwide provider of test, measurement and
        monitoring instrumentation equipment, took a license for the ARC 600
        core, the ARC MQX(TM) RTOS and MetaWare tools.

    --  TTPCom -- an independent supplier of digital wireless technology to many
        of the world's largest cellular handset manufacturers, has partnered
        with ARC to deliver low-cost digital cellular engines to the growing
        handset market. Under the terms of a wide-ranging licensing agreement,
        TTPCom has implemented ARC's configurable processor cores in its latest
        cellular baseband engine (CBEmacro). Other terms of the agreement
        include marketing and sales activities.

Partnerships with Best-in-Class Companies

To help ensure ARC provides more of a total solution to customers without
dramatically increasing our research and development costs, ARC is working with
industry leaders within the electronic design automation (EDA), embedded
software tools and consumer applications industries.

    --  Codito Technologies -- provides software stacks, customized development
        tools and operating systems, communication protocol stacks and embedded
        application software. Codito's ARC-Based Linux and GNU development work
        offers ARC customers the combination of a low cost processor supported
        by an industry standard and royalty-free operating system for their next
        generation devices.

    --  Dolby Laboratories -- develops and delivers products and technologies
        that make the entertainment experience more realistic and immersive.
        Dolby has certified the ARCsound audio subsystem for 5.1-channel Dolby
        Digital consumer decoder (AC-3) technology.

    --  Green Hills Software -- is a recognized market leader in embedded
        software development tools and royalty-free real-time operating systems
        (RTOS). Through this partnership, ARC now can license its processor
        cores to customers that prefer Green Hills' MULTI(R) Integrated
        Development Environment.

    --  Microsoft -- certified the ARCsound audio subsystem for Microsoft
        Windows Media Audio decoder. Already shipping to customers, the ARCsound
        audio subsystem enables system OEMs and semiconductor companies to get
        to market quickly with an optimized, preconfigured audio platform that
        eliminates the need for specialized hardware.

    --  Magma -- develops software for electronic design automation, enabling
        integrated circuit designers to meet critical time-to-market objectives.
        Magma announced the availability of a validated reference methodology
        for their EDA software in conjunction ARC 600 family of configurable
        microprocessor cores. The reference methodology, available from Magma,
        has been implemented in a 0.13-micron design flow and was instrumental
        in helping a mutual customer surpass many of their design goals in less
        than one week.

    --  On2 Technologies -- is a leading supplier of video compression software.
        Through this relationship, On2 will port their VP6 video codec to ARC
        processors. VP6 is On2's latest video compression software, and it is
        used on PCs, set-top boxes, games and wireless consumer electronics
        products.

    --  Emulation and Verification Engineering (EVE) -- offers innovative
        intellectual property and hardware-assisted verification solutions and
        services. EVE will integrate ARC's MetaWare debugger into EVE's ZeBu
        verification system. The resulting verification system will allow
        customers to download ARC's configurable cores into their FPGA-based
        hardware development system and achieve fast simulation times and
        efficient system debug.

Outlook

The management team is pleased with ARC's accomplishments throughout 2004. Our
revenue achieved record-high levels based on strong growth in SoC customers, and
we maintained effective cost controls that reduced overall expenses.

Looking ahead to 2005, we believe the digital consumer market will continue to
drive many of the industry's design starts. Our unique subsystem technology and
optimized CPU and DSP core products are especially suited to meet the demands of
this market, and we will work to ensure ARC International further increases its
share of the consumer and other high-growth areas globally.

Financial Review

Six months ended 31 December 2004

Turnover

Total turnover in 2H 2004 was GBP6.0 million up 9% over the same period last
year (2H 2003: GBP5.5 million) including the effect of the peripherals disposal.
Prior to currency translation, with virtually all sales in US dollars,
underlying turnover was up 20% over 2H 2003. License income increased 15% from
the same period last year at GBP3.8 million (2H 2003: GBP3.3 million).
Maintenance and service income was down 17% from 2H 2003 at GBP0.8 million due
to the sale of the peripherals business. The increase in the number of designs
being shipped by our customers contributed to a 12% increase in royalties to
GBP1.4 million (2H 2003: GBP1.3 million).

Sales in Europe were 33% of total sales, North America 63% and Asia 4%. From a
business unit perspective, 78% of revenue was from the SoC business with the
remaining 22% delivered by the embedded software business unit. Within the SoC
segment, GBP1.4 million in 2H 2003 was generated by peripheral products that
represented the business sold to TransDimension Inc. Removing this revenue from
the relevant comparisons, year on year revenue growth in 2H 2004 was 46% in
sterling and 62% in US dollars.

Costs

Cost of sales of GBP0.7 million was flat year over year (2H 2003: GBP0.7
million). Gross margin in 2H 2004 increased to 88% (2H 2003: 87%). Total
operating expenses (excluding share based award expense, exceptional items,
amortisation of goodwill and depreciation) decreased by 39% year-over-year to
GBP8.0 million (2H 2003: GBP13.1 million).

The Company had 131 employees at 31 December 2004 compared with 133 at 30 June
2004. Research and development costs decreased 41% year over year to GBP3.5
million (2H 2003: GBP5.9 million). Sales and marketing costs decreased 42% year
over year to GBP2.2 million (2H 2003: GBP3.8 million). General and
administration costs before share based award expense of GBP1.6 million were
down 41% year over year (2H 2003: GBP2.7 million). Including the share based
award expense charge of GBP0.3 million, overall general and administration costs
were GBP1.9 million.

Interest

Interest income was up 5% year over year at GBP0.8 million.

Net loss

The net loss prior to exceptional items was GBP3.0 million representing an
improvement of 72% year-over-year (2H 2003: GBP10.7 million). Loss per share
prior to exceptional items improved to 2.13p (2H 2003: 7.74p). Net loss was
GBP1.8 million (2H 2003: GBP14.9 million).

Exceptional items in 2H 2004 are comprised of the release of restructuring
provision charges of GBP0.4 million relating to onerous leases and a gain of
GBP0.7 million on the sale of the USB business. The gain represents the net cash
proceeds received in 2H 2004 and deferred profit in respect of deferred revenue
of GBP184,000 from TransDimension Inc in 2H 2004.

Cash flow and balance sheet

The net cash outflow from operations was GBP3.2 million (2H 2003: GBP8.0
million). Capital expenditure was GBP0.1 million. The movement in net funds
during the six months was an outflow of GBP2.1 million. Net assets at 31
December 2004 were GBP35.6 million, including net cash of GBP34.1 million, of
which GBP0.2 million was used to secure a letter of credit issued to our
landlord (see note 3).

Dividend

No interim dividend payment will be made for the six months ended 31 December
2004.

Twelve months ended 31 December 2004

Turnover

Total turnover at GBP12.2 million was up 26% at constant exchange rates and up
13% from the previous year with currency impact (2003: GBP10.7 million)
including the effect of the peripherals disposal. License income was GBP7.6
million (2003: GBP7.0 million). Maintenance and service income was GBP1.7
million (2003: GBP1.9 million). Royalties were GBP2.9 million (2003: GBP1.8
million).

Sales in Europe were 26% of total sales, North America 67% and Asia 7%. From a
business unit perspective, 79% of revenue was from the SoC business and the
remaining 21% was from the embedded software business unit. Within the SoC
business, GBP2.8 million in 2003 and GBP1.3 million in 2004 revenue was
generated by peripheral products that represented the business sold to
TransDimension Inc. Removing this revenue from the comparisons, year on year
revenue growth in 2004 was 36% in sterling and 62% in US dollars.

Costs

Cost of sales was GBP1.7 million (2003: GBP1.5 million), resulting in a gross
margin of 86% (2003: 86%). Total operating expenses (excluding share based award
expense, exceptional items, amortisation of goodwill and depreciation) decreased
32% to GBP18.4 million (2003: GBP27.1 million).

Total headcount in the business at 31 December 2004 was 131 employees compared
with 174 at 31 December, 2003. Research and development costs were down 34% to
GBP8.2 million (2003: GBP12.4 million), sales and marketing costs were down 44%
to GBP4.7 million (2003: GBP8.5 million) and general and administration costs
were down 21% to GBP3.8 million (2003: GBP4.7 million) before the 2004
share-based award expense charge of GBP0.3 million.

Interest

Interest income was GBP1.4 million (2003: GBP2.4 million) due to reduction of
cash balance as a result of share buy back in 2003.

Net loss

The net loss before exceptional items was GBP7.0 million (2003: GBP20.7
million). Exceptional items are comprised of restructuring provision charges of
GBP0.6 million relating to reductions in workforce announced in February 2004,
onerous leases and a gain of GBP2.6 million on the sale of the USB business. The
gain represents the net cash proceeds received less associated fees and asset
transfers. Under the terms of the agreement, a further GBP0.3 million is due on
15 June 2005. The receipt of this will be recognised upon the earlier receipt of
the funds or when collectibility is determined to be reasonably assured.

Cash flow and balance sheet

The net cash outflow from operations was GBP8.4 million (2003: GBP17.5 million).
Capital expenditure was GBP0.4 million (2003: GBP2.7 million). The outflow of
net funds was GBP3.3 million (2003: GBP15.7 million excluding the share
buyback). Net assets at 31 December 2004 were GBP35.6 million (31 December,
2003: GBP40.4 million), including net cash of GBP34.1 million, of which GBP0.2
million was used to secure a letter of credit issued to our landlord (see note
3).

Dividend

No dividend payment will be made for the year ended 31 December 2004.

International Financial Reporting Standards

We are on track to commence reporting on accounts in accordance with
International Financial Reporting Standards from our interim results for the
period ending 30 June 2005. We have completed preliminary assessments of the
major areas of impact.

Consolidated profit and loss account
for the twelve months ended 31 December 2004

                        6 months    6 months   12 months   12 months
                        ended 31    ended 31    ended 31    ended 31
                        December    December    December    December
                          2004        2003        2004        2003
                      (unaudited) (unaudited) (unaudited)  (audited)
                        GBP '000    GBP '000    GBP '000    GBP '000
----------------------------------------------------------------------
Turnover                   5,952       5,456      12,162       10,741

Operating costs
----------------------------------------------------------------------
 Goodwill amortisation      (405)     (1,852)       (813)      (3,788)
 Exceptional
  (costs)/gain (6)           432      (4,185)       (626)      (3,889)
 Other operating costs    (9,165)    (15,169)    (20,616)     (31,023)
----------------------------------------------------------------------
                          (9,138)    (21,206)    (22,055)     (38,700)

Operating loss            (3,186)    (15,750)     (9,893)     (27,959)
Exceptional gain -- on
 business disposal (5)       723           -       2,578            -
----------------------------------------------------------------------
Loss on ordinary
 activities before
 interest and tax         (2,463)    (15,750)     (7,315)     (27,959)
Interest receivable
 and similar income          761         728       1,445        2,414
Interest payable and
 similar charges              (2)         (7)         (2)         (10)
----------------------------------------------------------------------
Loss on ordinary
 activities before
 tax                      (1,704)    (15,029)     (5,872)     (25,555)
Tax
 credit/(provision)
 on loss on ordinary
 activities                  (95)        157         790          979
----------------------------------------------------------------------
Retained loss for the
 period                   (1,799)    (14,872)     (5,082)     (24,576)
======================================================================

Basic loss per share     (1.30)p    (10.77)p     (3.67)p     (12.16)p
Diluted loss per
 share                   (1.30)p    (10.77)p     (3.67)p     (12.16)p
Pre-exceptional loss
 per share               (2.13)p     (7.74)p     (5.08)p     (10.24)p
======================================================================

Summary of operating
 expenses

Operating costs
 Costs of sales             (736)       (718)     (1,661)      (1,498)
 Research &
  development             (3,534)     (5,946)     (8,206)     (12,439)
 Sales & marketing        (2,188)     (3,789)     (4,744)      (8,453)
 General &
  administrative          (1,586)     (2,681)     (3,753)      (4,734)
 Share based award
  expense                   (321)          -        (321)           -
 Depreciation of fixed
  assets                    (800)     (2,035)     (1,931)      (3,899)
 Amortisation of
  goodwill                  (405)     (1,852)       (813)      (3,788)
 Exceptional costs --
  provision release          441          84         441          620
 Exceptional costs --
  restructuring
  provision                   (9)          -      (1,067)        (240)
 Exceptional cost --
  goodwill impairment          -      (2,930)          -       (2,930)
 Exceptional cost --
  asset writedown              -      (1,339)          -       (1,339)
----------------------------------------------------------------------
Total operating
 expenses                 (9,138)    (21,206)    (22,055)     (38,700)
======================================================================

Consolidated Statement of Total Recognised Gains and Losses
for the twelve months ended 31 December 2004

                        6 months    6 months   12 months   12 months
                        ended 31    ended 31    ended 31    ended 31
                        December    December    December    December
                          2004        2003        2004        2003
                      (unaudited) (unaudited) (unaudited)  (audited)
                        GBP '000    GBP '000    GBP '000    GBP '000
----------------------------------------------------------------------
Retained loss for the
 period                   (1,799)    (14,872)     (5,082)     (24,576)
Currency translation
 difference                 (357)          6        (218)          51
Adjustment to other
 reserves                      2        (165)          2         (165)
----------------------------------------------------------------------
Total loss for the
 period                   (2,154)    (15,031)     (5,298)     (24,690)
======================================================================

Consolidated balance sheet
as at 31 December 2004

                                              31 December  31 December
                                                 2004         2003
                                              (unaudited)   (audited)
                                               GBP '000     GBP '000
----------------------------------------------------------------------
Fixed assets

Intangible assets                                    233        1,048
Tangible assets                                    1,740        3,697
----------------------------------------------------------------------
                                                   1,973        4,745
======================================================================

Current assets

Stock                                                  -           22
Debtors                                            2,927        3,174
Investments-bank deposits                         29,176       34,579
Cash at bank and in hand                           4,920        2,579
----------------------------------------------------------------------
                                                  37,023       40,354
Creditors-amounts falling due within one
 year                                             (2,865)      (3,792)
----------------------------------------------------------------------
Net current assets                                34,158       36,562

Total assets less current liabilities             36,131       41,307
Provisions for liabilities and charges (6)          (524)        (918)
----------------------------------------------------------------------
Net assets                                        35,607       40,389
======================================================================

Capital and reserves

Called-up share capital                              145          144
Share premium account                              1,674        1,450
Exchangeable shares                                  643          673
Capital redemption reserve                           162          162
Merger reserve                                       107          107
Other reserves                                    59,551       59,230
Profit and loss account                          (26,675)     (21,377)
----------------------------------------------------------------------
Total shareholders' funds                         35,607       40,389
======================================================================


Consolidated cash flow statement
for the twelve months ended 31 December 2004

                        6 months    6 months   12 months   12 months
                        ended 31    ended 31    ended 31    ended 31
                        December    December    December    December
                          2004        2003        2004        2003
                      (unaudited) (unaudited) (unaudited)  (audited)
                        GBP '000    GBP '000    GBP '000    GBP '000
----------------------------------------------------------------------
Net cash outflow from
 operating activities
 (4)                      (3,207)     (8,015)     (8,440)    (17,525)

Returns on
 investments,
 servicing of finance

Taxes paid                  (110)         (1)       (117)        (45)
Tax refund                     -         223       1,228       1,094
Interest received            824       1,409       1,414       3,301
Bank interest paid            (1)         (6)         (2)         (8)
----------------------------------------------------------------------
                             713       1,625       2,523       4,342

Capital expenditure
 and financial
 investment

Purchase of tangible
 fixed assets                (70)     (1,157)       (432)     (2,686)
Disposal of tangible
 fixed assets                  8          (2)          8         168
Share buyback                  -         (49)          -     (48,329)
----------------------------------------------------------------------
                             (62)     (1,208)       (424)    (50,847)

Acquisitions and
 disposals

Proceeds from sale of
 business (5)                519           -       3,058           -
----------------------------------------------------------------------
Net cash outflow
 before management of
 liquid resources and
 financing                (2,037)     (7,598)     (3,283)    (64,030)
----------------------------------------------------------------------
Management of liquid
 resources

Movement on term
 deposits                  2,068       8,321       5,403      63,485
----------------------------------------------------------------------
Financing

Financing -- issue of
 ordinary share
 capital to satisfy
 share option
 exercises                   191          17         197         325
Capital element of
 finance lease
 rentals                       -          (1)          -          (2)
----------------------------------------------------------------------
Net cash inflow from
 financing                   191          16         197         323
----------------------------------------------------------------------
Increase/(Decrease)
 in cash during the
 period (2)                  222         739       2,317        (222)
======================================================================

These preliminary results have been approved by the Board of Directors
on 8 February 2005.

(1) Accounting Policies

The accounting policies adopted in the preparation of the preliminary
announcement are consistent with those used in the financial
statements for the year ended 31 December 2003. The preliminary
results for the year ended 31 December 2004 are unaudited. The
financial information set out in the announcement does not constitute
the Company's statutory accounts for the year ended 31 December 2004
or 31 December 2003. The financial information for the year ended 31
December 2003 is derived from the statutory accounts for that year,
which have been delivered to the Registrar of the Companies. The
auditors reported on those accounts: their report was unqualified and
did not contain a statement under either section 237 (2) or section
237 (3) of the Companies Act 1985.

(2) Reconciliation of net cash flow to movement in net funds

                        6 months    6 months   12 months   12 months
                        ended 31    ended 31    ended 31    ended 31
                        December    December    December    December
                          2004        2003        2004        2003
                      (unaudited) (unaudited) (unaudited)  (audited)
                        GBP '000    GBP '000    GBP '000    GBP '000
----------------------------------------------------------------------
Increase/(Decrease)
 in cash in the
 period                      222         739       2,317        (222)
Cash outflow from
 increase in liquid
 resources                (2,068)     (8,321)     (5,403)    (63,485)
----------------------------------------------------------------------
                          (1,846)     (7,582)     (3,086)    (63,707)

Exchange movements          (223)       (143)         24        (120)
----------------------------------------------------------------------
Movement in net funds     (2,069)     (7,725)     (3,062)    (63,827)
Net funds at
 beginning of period      36,165      44,883      37,158     100,985
----------------------------------------------------------------------
Net funds at end of
 period                   34,096      37,158      34,096      37,158
======================================================================

(3) Analysis of net funds
                                    Cash at
                                    bank and
                                    In hand   Investments     Total
                                  (unaudited) (unaudited)  (unaudited)
                                   GBP '000    GBP '000     GBP '000
----------------------------------------------------------------------
As at 1 January 2004                   2,579      34,579      37,158
Exchange                                  24           -          24
Cash flow                              2,317      (5,403)     (3,086)
----------------------------------------------------------------------
At 31 December 2004
 including restricted
 cash                                  4,920      29,176      34,096
======================================================================

At 31 December 2004, cash balances with banks include GBP 161,000 of
cash deposit which is used to secure a letter of credit issued to our
landlord. It is expected to be released in December 2005.

(4) Reconciliation of operating loss to net cash flow from operating
    activities

                        6 months    6 months   12 months   12 months
                        ended 31    ended 31    ended 31    ended 31
                        December    December    December    December
                          2004        2003        2004        2003
                      (unaudited) (unaudited) (unaudited)  (audited)
                        GBP '000    GBP '000    GBP '000    GBP '000
----------------------------------------------------------------------

Operating loss            (3,186)    (15,750)     (9,893)    (27,959)
Depreciation                 800       2,035       1,931       3,899
Fixed assets
 impairment                    -       1,339           -       1,339
Amortisation of
 goodwill/intangibles        405       1,852         813       3,788
Goodwill impairment            -       2,930           -       2,930
Loss on disposal of
 fixed assets                  -           -         206           -
Share option grant
 credit                        -         (11)          -         (11)
Share based award
 expense                     321           -         321           -
(Increase)/decrease
 in stocks                    (1)         64         (17)         66
(Increase)/decrease
 in debtors                  339         (95)        337         854
(Decrease) in
 creditors                (1,097)       (154)     (1,744)       (784)
Increase/(decrease)
 in provisions              (788)       (225)       (394)     (1,647)
----------------------------------------------------------------------
Net cash outflow from
 operating activities     (3,207)     (8,015)     (8,440)    (17,525)
======================================================================

(5) Exceptional gain -- on sale of business
                                                6 months    12 months
                                                ended 31    ended 31
                                                December    December
                                                  2004        2004
                                               GBP '000s   GBP '000s
                                              (unaudited) (unaudited)
----------------------------------------------------------------------
Cash consideration
 received                                            519       3,058
Recognition of
 deferred profit in
 respect of deferred
 revenue                                             184         184
Net assets disposed of                                20        (664)
----------------------------------------------------------------------
Gain on sale of
 business                                            723       2,578
======================================================================

On 30 June 2004, the Company completed an agreement to sell the
peripherals business and certain associated assets and liabilities to
TransDimension, Inc for a purchase price of GBP 3.6 million ($6.65
million). Net cash consideration of GBP 3.1 million ($5.6 million) was
received in the year. In addition, GBP 184,000 of deferred profit in
respect of deferred revenue was recognised in the second half of 2004.
The remainder of the consideration is in the form of a promissory note
for $650,000 payable on 15 June 2005. The note also accrues interest
at a fixed rate of 5% per annum. The amount unpaid under this
promissory note has not been recognised within the above gain on sale
as of 31 December 2004. This amount will be recognised upon the
earlier of receipt of the payments or when collectibility is
determined to be reasonably assured.

(6) Provisions for liabilities and charges

                                                         Restructuring
                                                             costs
                                                          (unaudited)
                                                           GBP '000s
----------------------------------------------------------------------
At 1 January 2004                                                 918
Provided in the year                                            1,067
Utilised                                                       (1,020)
Released                                                         (441)
----------------------------------------------------------------------
At 31 December 2004                                               524
======================================================================

(7) Movement on reserves and share capital

                          Share      Share    Exchangeable   Merger
 Group                   Capital    Premium      Shares      Reserve
 (unaudited)             GBP '000   GBP '000    GBP '000     GBP '000
----------------------------------------------------------------------

At 1 January 2004            144       1,450          673         107

Shares issued                  1         194
Exchangeable shares
 exercised                                30          (30)
Change in value of
 ESOP reserve
Share option expense
 reserve
Exchange loss
Retained loss for 12
 months ended 31
 December 2004
----------------------------------------------------------------------
At 31 December 2004          145       1,674          643         107
======================================================================

                          Capital               Profit &
                        Redemption    Other       Loss
 Group                    Reserve    Reserves    Account      Total
 (unaudited)             GBP '000    GBP '000   GBP '000    GBP '000
----------------------------------------------------------------------

At 1 January 2004            162      59,230     (21,377)      40,389

Shares issued                                                     195
Exchangeable shares
 exercised                                                          -
Change in value of
 ESOP reserve                                          2            2
Share option expense
 reserve                                 321                      321
Exchange loss                                       (218)        (218)
Retained loss for 12
 months ended 31
 December 2004                                    (5,082)      (5,082)
----------------------------------------------------------------------
At 31 December 2004          162      59,551     (26,675)      35,607
======================================================================

(8) Basis of Consolidation

The consolidated accounts incorporate the accounts of the Company and
of each of its subsidiaries for the year ended 31 December 2004. The
results of disposed business are included in the Group profit and loss
account up to the date of disposal.

About ARC International plc

ARC International is the world leader in low-power, high-performance 32-bit
configurable CPU/DSP processor cores, subsystems, real-time operating systems
and development tools for embedded system design. ARC's configurable and
extendible cores assist customers in the development of next generation digital
media, consumer and communications devices, resulting in lower cost, higher
performance SoC products.

ARC International maintains a worldwide presence with corporate offices in San
Jose, Calif., USA and Elstree, UK. The Company has research and development
offices located in England and the United States. For more information please
visit the ARC website at: www.ARC.com. ARC International is listed on the London
Stock Exchange as ARC International plc (LSE:ARK).

ARC, ARC logo and ARC-Based are trademarks or registered trademarks of ARC
International. All other brands or product names contained herein are the
property of their respective owners. This press release may contain certain
"forward-looking statements" that involve risks and uncertainties. For factors
that could cause actual results to differ, visit the company's website as well
as the listing particulars filed with the United Kingdom Listing Authority and
the Registrar of Companies in England and Wales.

CONTACT: ARC International
         Lee Garvin Flanagin, 408-437-3433 (Media)
         or
         Tulchan Communications Group
         Kate Inverarity and Tim Lynch, [phone] (Analyst)