Year end trading update

IQE plc

Strong trading performance in 2008 despite global economic crisis;
cost base realigned to protect margins in 2009



28 January 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, is pleased to provide a trading update for
the year ended 31 December 2008, based on unaudited management
results.

Despite the severe global economic downturn in the second half of
2008, IQE expects to report full-year 2008 results in line with
long-standing market expectations, with revenues of approximately
£60m, up 20% on 2007, and EBITDA* of approximately £8.4m, more than
double that of 2007.

IQE expects to report a strong conversion of EBITDA into cash flow
from operations, reflecting a minimal absorption of cash into working
capital despite the continued growth in the business. Furthermore,
the Group expects to deliver a positive free cash flow* even after
funding the final phase of a major investment programme to commission
spare capacity, the relocation of the Singapore business and the
investment in the development of new product lines such as solar
cells and ultra efficient light-emitting diodes (LEDs). Following the
completion of this capital programme, the investment in
infrastructure in 2009 is expected to be minimal.  This is expected
to result in a significant improvement in free cash generation in
2009.

IQE has proactively cut costs to meet the current and future
challenging market conditions. Following a strong third quarter of
2008, the global economic upheaval affected IQE's business during the
fourth quarter, with a dramatic inventory reduction occurring
throughout the supply chains of IQE's major customer base. To ensure
that the cost base remained aligned with underlying levels of
activity and to protect margins, the Group cut its fixed cost base,
in part by consolidating and restructuring some operations.

This restructuring resulted in exceptional costs of £1.2m, in
addition to the £2.4m previously indicated.  The latter relates to
the successful relocation of the Singapore facility to a
state-of-the-art clean room complex which was completed in September
2008 on time and within budget. Approximately half of the £1.2m of
the restructuring costs are non-cash items relating to asset
write-downs. Overall exceptional charges for 2008 are expected to be
around £3.6m with the restructuring completed by the end of December
2008.

The combination of cost reductions and investment in infrastructure,
coupled with the development of an exciting range of new products,
has positioned IQE strongly to respond rapidly to improvements in
demand as and when they arise in its end markets.

Although the inventory reductions are expected to continue through
the first quarter of 2009, the Group sees indications that the
markets will begin to pick up during the second quarter as
inventories stabilise and customer pulls return to actual consumption
levels.

During 2009 as a whole, the smartphone/3G wireless market, which has
been the major driver for the Group's revenue increases over the last
three years, is expected to be broadly similar in volume to 2008.
However, the Group expects to bring additional products to market
during 2009 to serve rapidly expanding markets for utility-scale
solar power generation and high-performance LEDs, driven by the
increasing global focus on energy efficient devices and systems.

The Group expects to publish its preliminary results in the week
commencing 22 March 2009.

Dr Drew Nelson, Group President & CEO said:

"Despite huge economic uncertainty and the impact of the global
financial crisis in the second half of 2008, IQE expects to deliver
results in line with expectations that were set long before the
downturn began to affect the industry.

"Our focus on reducing costs and investing in infrastructure and new
product innovation has positioned IQE strongly to benefit from any
upturn in the semiconductor market and the global emphasis on energy
efficiency. We were strongly cash generative in 2008 and expect free
cash generation to improve significantly in 2009 now that our
infrastructure investment programme has been completed."

*Stated before exceptional items and the non-cash share option charge



Contacts:

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

Noble & Company Limited ([phone])
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, high efficiency LEDs and a variety of advanced silicon based
systems.

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.

---END OF MESSAGE---




This announcement was originally distributed by Hugin. The issuer is 
solely responsible for the content of this announcement.