Strong operating performance in first half of 2...

15 July 2009

IQE plc (AIM: IQE, "IQE" or the "Group") the leading global supplier
of advanced semiconductor wafer products and wafer services to the
semiconductor industry, provides a trading update for the first half
ended 30 June 2009.

The Group achieved a strong operating performance in the first half
of 2009 despite the industry wide destocking that adversely affected
sales during Q4 2008 and Q1 2009. As anticipated in the 2008
preliminary announcement on 24 March 2009, this destocking ran its
course in early Q2 and orders picked up sharply in May and June. The
Board therefore expects that the Group's first half performance will
be at least in line with market expectations, with revenues of about
£20.0 million and EBITDA of at least £1.2 million.

This sound financial performance during an extremely tough economic
environment clearly demonstrates the resilience of the Group's
business model. The decisive and proactive action taken by management
during Q4 2008 ensured that the business remained EBITDA positive
even at the lowest point in the cycle in January and February of
2009.

As the business resumes rapid growth the Group will now continue to
benefit from lower costs and higher margins resulting from many of
the structural efficiencies achieved.

The increase in trading activity towards the end of the first half
has seen some absorption of cash into working capital, reflecting
higher trading volumes.  Net debt is expected to be better than
market expectations of approximately £20.0 million as at 30 June
leaving more than £5.0 million funding headroom. The Group has been
operating well within its banking arrangements and the Board expects
net debt to decrease in the second half.

The outlook for the second half remains positive, with the Group
expecting continued strong growth in sales volumes. This positive
outlook, despite the continuing backdrop of global economic
uncertainty, reflects the Group's powerful positioning in its high
growth markets, principally in wireless communications, including 3G
and feature rich smartphones.

In addition, new product development continues with excellent
progress in solar activities, where customers are achieving world
record efficiency results, and in ultra low power LED products.
Further progress on next generation electronic materials was
demonstrated by the recent release of new engineered substrates such
as Germanium on Insulator (GeOI) for next generation integrated
circuits and devices.
Dr Drew Nelson, IQE's Chief Executive, said:

"We are seeing indicators of strong growth returning to a number of
the high-end markets in which IQE operates and as anticipated in the
March trading outlook, it is the smartphone products that have been
amongst the first to resume growth amongst our customer base.

"Our financial performance has remained strong. We are achieving
optimal production efficiencies with lean operations across the Group
and expect to benefit from our high operational gearing as sales
growth recovers. The Board remains confident that strong demand for
our exciting and innovative product range will resume during the
second half of 2009."

IQE expects to report its interim results on 2 September 2009.

Contacts:

IQE plc ([phone])
Chris Meadows
Phil Rasmussen
Drew Nelson

Noble & Company Limited (+ 44 20 7763 2200)
John Llewellyn-Lloyd
Sam Reynolds

College Hill ([phone])
Adrian Duffield
Carl Franklin


Note to Editors

IQE is the leading global supplier of advanced semiconductor wafers
with products that cover a diverse range of applications, supported
by an innovative outsourced foundry services portfolio that allows
the Group to provide a 'one stop shop' for the wafer needs of the
world's leading semiconductor manufacturers.

IQE uses advanced crystal growth technology (epitaxy) to manufacture
and supply bespoke semiconductor wafers ('epi-wafers') to the major
chip manufacturing companies, who then use these wafers to make the
chips which form the key components of virtually all high technology
systems. IQE is unique in being able to supply wafers using all of
the leading crystal growth technology platforms.

IQE's products are found in many leading-edge consumer,
communication, computing and industrial applications, including a
complete range of wafer products for the wireless industry, such as
mobile handsets and wireless infrastructure, Wi-Fi, WiMAX, base
stations, GPS, and satellite communications; optical communications,
optical storage (CD, DVD), laser optical mouse, laser printers &
photocopiers, thermal imagers, leading-edge medical products,
barcode, ultra high brightness LEDs, a variety of advanced silicon
based systems and high efficiency concentrator photovoltaic (CPV)
solar cells.

The manufacturers of these chips are increasingly seeking to
outsource wafer production to specialist foundries such as IQE in
order to reduce overall wafer costs and accelerate time to market.

IQE also provides bespoke R&D services to deliver customised
materials for specific applications and offers specialist technical
staff to manufacture to specification either at its own facilities or
on the customer's own sites. The Group is also able to leverage its
global purchasing volumes to reduce the cost of raw materials. In
this way IQE's outsourced services, provide compelling benefits in
terms of flexibility and predictability of cost, thereby
significantly reducing operating risk.

IQE operates six manufacturing facilities located in Cardiff (two)
and Milton Keynes in the UK; in Bethlehem, Pennsylvania and Somerset,
New Jersey in the USA; and Singapore. The Group also has 11 sales
offices located in major economic centres worldwide.

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