EAG Limited - Preliminary Results

RNS Number:1226R
EAG Limited
31 March 2008

EAG Limited

Preliminary results for the year ended 31 December 2007

EAG Limited (AIM: EAG), a leading fully integrated and independent provider of
microanalytical surface analysis and microelectronic failure analysis services,
announces its preliminary results for the year ended 31 December 2007.

HIGHLIGHTS

• Revenue up 145% to $69.2m (2006: $28.3m) reflecting full year impact of
acquisitions and organic growth.

• Operating profit before special items* up 170% to $16.1m (2006: $6.0m).

• Operating profit up 119% to $10.2m (2006: $4.7m).

• Profit before tax and special items* increased to $8.0m (2006: $1.9m)
reflecting increased operating profit and changed financing structure.

• Earnings per share before special items* down 15% to 6.7c (2006: 7.9c).

• Cash generated from operations up 144% to $16.7m (2006: $6.8m).

• Consequent on financing structure prior to the IPO, loss before tax of
$100.8m (2006: $35.4m loss) and loss per share of 222.1c (2006: 147.2c loss)
reflecting principally non-cash charges of debt instruments.

• Maiden interim dividend paid of 3c per share. No final dividend proposed.

• On 26 June 2007, EAG completed its IPO on the AIM market of the London
Stock Exchange, raising gross proceeds of £125m.

• Since flotation, EAG obtained $140m of new financing facilities, which
have been renegotiated to a revised level of $75m that reflects termination
of the acquisition strategy. Net debt was $47.1m at the year end.

Ian Johnson, EAG's Chairman, commented: "2007 was certainly an eventful year.
The IPO and new financing facilities laid the foundation for a period of rapid
growth by acquisition to expand into the complementary market of failure
analysis while continuing to build EAG's leading position in surface analysis.
The consequences of the rapid enlargement and multiple integration issues
required changes to be made to the board and senior management at the end of the
year together with strengthening of the finance function. A full strategic
review of the business was initiated, including the possibility of an outright
sale. This review is well underway and expressions of interest have been
received from a number of parties to acquire the company. With publication of
these results, the board is able to pursue a fuller dialogue and accelerate the
process. Trading in the new year has been broadly in line with market
expectations, notwithstanding the challenging conditions in EAG's main markets.
I would like to take this opportunity to thank the staff and senior management
for their continued efforts and loyalty throughout a challenging period. We
remain confident in the attractiveness of the markets and their growth prospects
over the longer term."

--------------------------------------------------------------------------------

*Certain items have been separately disclosed as special in order to present
what the board considers to be a more balanced perspective of the underlying
trading performance. These include management fees to related parties prior to
the IPO, aborted acquisition expenses and legal costs, amortisation of acquired
intangible assets, finance costs associated with the reorganisation and
restructuring prior to the IPO, tax impact of special items and deferred
taxation on restructuring at the IPO.

Enquiries:

EAG Limited
Ian Johnson - Non-Executive Chairman Tel: +44 (0) 7785 324 384
Martin Hopcroft - Chief Financial Officer Tel: +44 (0) 7890 024 534

Lazard & Co., Limited Tel: +44 (0) 20 7187 2000
Francis Smedley
Nick Fowler

Citigate Dewe Rogerson Tel: +44 (0) 20 7638 9571
Kevin Smith
Lindsay Noton

About EAG Limited

EAG Limited is a leading global provider of microanalytical surface analysis,
microelectronic failure analysis and "release to production" testing services
for integrated circuit development. Services are delivered to research and
development departments, fabless semiconductor companies and integrated circuit
manufacturers, where surface properties are critical to product performance.
End-user markets include semiconductor capital equipment, electronic materials,
specialty metals and alloys, semiconductor fabrication, photovoltaics,
biomedical, pharmaceutical, and aerospace and defence. Incorporated in Jersey
and headquartered in Ireland, EAG Limited was admitted to AIM in June 2007.
Further information is available at www.eaglabs.com.

OVERVIEW

On 26 June 2007, EAG Limited ("EAG") completed its initial public offering ("IPO
") on the AIM market of the London Stock Exchange ("AIM"), raising gross
proceeds of £125m. Subsequently, EAG arranged $140m of new financing facilities,
which are expected to be reduced following termination of the acquisition
strategy. These proceeds and financing facilities provided EAG the resources to
continue its expansion by acquisition into microelectronic failure analysis
services, thereby broadening the range of testing services on offer to
customers.

The businesses in microanalytical surface analysis and materials
characterisation services, which constitute 63% of EAG's revenues, continued to
build on their market leading positions. This was driven by continued investment
in instruments and skilled scientists to further broaden and expand the testing
services.

Shortly before the IPO, EAG acquired the business of Accurel Systems
International, which has now been combined with that of AMER Inc, which was
acquired in late 2006. Since flotation, EAG continued its expansion strategy
with the acquisitions of Micro Electronic Failure Analysis Services Inc, DSL
Labs Inc and White Mountain Labs LLC. Together, these acquisitions position EAG
as a leading supplier of microelectronic failure analysis services. This
reflects the strategy of building leading positions in both microanalytical
surface analysis and microelectronic failure analysis.

On 19 December 2007, EAG announced an increase in overall expenses since the
IPO, together with a realignment of management responsibilities and the
initiation of a full strategic review to consider all options, including the
possibility of an outright sale. Ian Johnson was appointed Non-Executive
Chairman, David Lahar previously Executive Chairman became Chief Executive, Jim
Cowart relinquished his position as Vice Chairman but remained a Non-Executive
Director, while Thomas Pfeil resigned as Chief Executive. Furthermore, an
independent committee of the Board was formed of non-executive directors to
consider the strategic options, including the possibility of an outright sale,
which is ongoing.

On 13 February 2008, EAG announced that it had received notification of the
formation of a concert party by a group of EAG shareholders comprising David
Lahar, Jim Cowart, Tom Pfeil and American Capital Strategies Limited.
Subsequently, on 26 March 2008, EAG announced that it had received notification
that the concert party had been disbanded, and that David Lahar and Jim Cowart
were no longer considering a possible offer for the company.

The strategic review is ongoing, and a number of expressions of interest have
been received that are being pursued through an orderly process to explore the
possibility of a sale. These results and the management budgeting process are
important tools which the board will use to appraise any offers or proposed
offers that might be made. The board will keep shareholders informed of
developments.

The company would like to remind shareholders that EAG is not subject to the
City Code on Takeovers & Mergers. However, the articles of association contain
certain provisions relating to takeovers, copies of which are available on the
company's website at www.eaglabs.com.

A maiden interim dividend of 3c per share was paid in October 2007. At the time
of the IPO, it was stated that the intention was to pay a dividend of 8c per
share in the first 12 months as a public company. However, the board has decided
to postpone any decision on future dividends, pending clarity of the future
strategy.

TRADING REVIEW

Four acquisitions were completed in the year which, together with earlier
acquisitions, has positioned the group as a leading supplier of microelectronic
failure analysis and "release to production" services. This opens an exciting
new market that is complementary to the microanalytical surface analysis and
materials characterisation services.

In 2007, EAG's clear market leadership in Secondary Ion Mass Spectrometry ("SIMS
") and Glow Discharge Mass Spectrometry ("GDMS") techniques, coupled with a
strong presence in Asia, resulted in solid growth in a number of segments -
electronic specialty metals and alloys, integrated circuit foundries, aerospace/
defence, lasers/optics and solar/energy.

EAG's semiconductor capital equipment and integrated device manufacturing
segments proved more challenging, as growth in the first half was followed by
contraction in the second half. In the late summer, major foundries and large
semiconductor manufacturers began to indicate that capital expenditure budgets
could be reduced. Among integrated device manufacturers, general economic
uncertainty, particularly with respect to EAG's European clients in this
segment, resulted in a reduction in demand for testing in second half. However,
EAG's revenue from the integrated circuit foundries and fabless semiconductor
companies has grown.

Geographically, 74% of total sales were derived in the United States, 17% in
Asia and 9% in Europe. Revenues from EAG's operations in Asia increased
significantly in 2007, particularly due to growth in demand from integrated
circuit foundries in Taiwan, China and Singapore, emerging demand for purity
testing of photovoltaic grade silicon feedstock in China, and the rapidly
expanding fabless semiconductor segment in China.

The surface analysis testing business operates primarily from US laboratories in
California, Minnesota, Massachusetts, Texas, New Jersey, North Carolina, and
Arizona, the international laboratories in France, Germany, United Kingdom,
Shanghai and Taiwan, as well as the sales office in Tokyo. The microelectronic
failure analysis and "release to production" services business operates
primarily from laboratories in northern and southern California and Arizona.

Microelectronic failure analysis and "release to production" testing services
are provided primarily to fabless semiconductor companies and small to
medium-sized integrated device manufacturers, and include automated test,
failure analysis, circuit debug and edit, reliability and qualification testing
(burn-in, stress, electro-static discharge and latch-up testing). These testing
services are critical in bringing an integrated circuit design from
conceptualisation to volume production.

In the year ahead, the plan is to integrate the acquisitions made during 2007.
As a consequence, four facilities are expected to be consolidated by combining
Accurel Systems International, AMER and DSL Labs into a single facility that is
designed to accommodate all aspects of the microanalytical failure analysis
services. This consolidation is expected to require one-time charges and capital
expenditure of approximately $2m.

Fabless semiconductor companies typically focus on two areas - circuit
conceptualisation and design, and application-specific sales and marketing. The
majority of the other operational areas - including prototype production,
failure analysis, reliability and qualification testing, and volume production -
are often outsourced. While the largest integrated device manufacturers (so
called Tier-1 IDMs) introduce a sufficient number of new products and have
sufficient volumes to justify maintaining their own in-house failure analysis
and "release to production" testing capabilities, most smaller IDMs (Tier-2 and
Tier-3) and the majority of fabless semiconductor companies find it difficult to
justify maintaining in-house capabilities and look to independent companies,
such as EAG, to provide these services on an outsourced basis.

EAG has incurred significantly higher corporate costs than planned in a number
of areas, including additional personnel and system costs to upgrade the
finance, human resource and information technology departments, professional
services fees related to being a public company, share-based compensation
expense, as well as one-off costs relating to the decision to realign management
responsibilities and terminate acquisition activity, pending the outcome of the
strategic review.

FINANCIAL REVIEW

Trading

For the full year, revenues increased by 145% to $69.2m (2006: $28.3m)
reflecting the full year impact of acquisitions as well as moderate growth in
underlying revenues. Geographically, revenues outside the US now account for 29%
(2006: 4%) of total revenues, with significant growth in Asia.

Operating profit before special items increased by 170% to $16.1m (2006: $6.0m),
reflecting the full year impact of acquisitions, as offset by a number of
one-time charges including $0.9m in severance payments.

In the second half, revenues were 7% ahead of the first half, which primarily
reflects the full year impact of acquisitions, offset by a moderate decline in
underlying revenues. Nevertheless, gross margins were maintained in the second
half as direct costs flexed with the change in revenues. However, there was a
stepped increase in indirect costs and corporate overheads to support the future
growth ambitions and to transition the business to a public company, so that
operating profit before special items in the second half declined to $5.2m (2007
H1: $10.9m).

Net finance charges before special items increased to $8.1m (2006: $4.0m), of
which $1.2m was incurred in the second half (2007 H1: $6.9m) reflecting the
geared financing structure before the IPO and the financing of the acquisition
programme.

Consequently, profit before tax and special items increased to $8.0m (2006:
$1.9m) reflecting revenue growth and the new financing structure at the IPO.

Certain special items amounting to a loss for the period of $107.5m (2006:
$37.3m loss) have been separately disclosed in order to present what the board
considers to be a more balanced perspective of the underlying trading
performance. These include management fees to related parties prior to the IPO,
aborted acquisition expenses and legal costs, amortisation of acquired
intangible assets, finance costs associated with the reorganisation and
restructuring prior to the IPO, tax impact of special items and deferred
taxation on restructuring at the IPO.

After special items, operating profit increased to $10.2m (2006: $4.7m) while
the loss before tax was $100.8m (2006: $35.4m loss) reflecting the non-cash
charges of debt instruments prior to the IPO.

Tax

Before the IPO, there was a minimal charge for taxation as the business was
treated as a partnership for US tax purposes whose profits were distributed to
its partners, who were responsible for income taxes on those profits.

EAG Limited and its wholly owned subsidiary, EAG Finance (Ireland) Limited, are
resident and taxable in Ireland. However, the charge for taxation reflects the
risk that the Internal Revenue Code could require EAG Limited to be treated as
if it is also a US resident corporation following the reorganisation at the time
of the IPO, as the tax status has not yet been resolved.

The tax rate on profit before tax and special items was 61% in 2007 (2006: 1%),
reflecting this new corporate structure. Taxation within special items is
represented by the tax effect of special items and deferred taxation resulting
from the restructuring at the IPO. After special items, the total tax charge for
the year was $3.5m (2006: $0.0m).

Earnings per share

Earnings per share before special items decreased by 15% to 6.7c (2006: 7.9c).
After special items and consequent on restructuring prior to the IPO, the loss
per share was 222.1c (2006: 147.2c loss) principally reflecting non-cash charges
of debt instruments.

The average number of shares in issue was 47.0m in 2007 (2006: 24.1m) and 66.7m
shares were in issue at 31 December 2007.

Dividends

A maiden interim dividend of 3c per share was paid, while dividends in kind of
$0.2m (2006: $0.4m) were made prior to the IPO. No final dividend is proposed.

Goodwill and intangible assets

Intangible assets are required to be capitalised and amortised over their useful
lives. Goodwill, being the difference between the fair value of purchase
consideration and the fair value of net assets (including intangible assets), is
required to be capitalised and not amortised. At the year end, the carrying
value of goodwill and intangible assets has been reviewed and their value was
upheld.

Cash flow

Cash generated from operations increased by 144% to $16.7m (2006: $6.8m),
reflecting the strong cash generative nature of the underlying businesses.
During the year there was capital expenditure of $5.4m mainly for instruments
and expenditure of $61.7m on four acquisitions, which were financed by new loans
and existing cash resources. There are further payments of $8.9m payable to the
vendors of acquired companies and businesses and other related payables, of
which $7.8m is payable in 2008.

Expenditure of $6.1m for a new building, which was under construction at the
time of the acquisition of Micro Electronic Failure Analysis Services Inc, is
included within expenditure on acquisitions. The original intention had been to
lease the building but, since it was not ready at the date of acquisition, it
was purchased outright with the intention of an eventual sale and leaseback. Any
refinancing has been postponed, pending progress on the strategic review.

Treasury

EAG raised £125m at the IPO. Since then, EAG obtained a $140m multi-currency
secured credit facility, comprising a $125m term loan facility for acquisition
purposes and a $15m revolving credit facility for working capital and general
corporate purposes. At the year end, the Group had net debt of $47.1m including
$15.1m of cash balances, together with $75.5m of undrawn facilities. Subsequent
to the year end, the facilities have been renegotiated, with the term loan
facility reduced from $125m to $60m and the revolving credit facility unchanged
at $15m, which reflects termination of the acquisition strategy.

The rate of exchange between the US dollar and sterling averaged 2.01 (2006:
1.84) during the year, while the rate of exchange was 1.98 (2006: 1.96) at the
year end.

OUTLOOK

Trading in the new year has been broadly in line with market expectations,
notwithstanding the challenging conditions experienced in EAG's main markets.
Looking ahead, there are a number of new areas of optimism, including Asia and
photovoltaic technologies. Nevertheless, the outlook is necessarily cautious in
light of uncertainties in the general economic environment, and particularly in
the semiconductor equipment and manufacturing areas, as well as the ongoing
strategic review. The company remains confident in the attractiveness of the
markets and their growth prospects over the longer term.

31 March 2008

Consolidated Income Statement

For the year ended 31 December 2007

Unaudited Unaudited Unaudited
2007 2007 2007 2006 2006 2006
Before Special Total Before Special Total
special items special items
items items
(Note 3) (Note 3)
Note $000 $000 $000 $000 $000 $000

Revenue 2 69,199 - 69,199 28,287 - 28,287

Operating expenses
Staff costs (28,372) - (28,372) (12,472) - (12,472)
Severance (927) - (927) - - -
Share-based compensation (755) - (755) - - -
Facilities (5,101) - (5,101) (2,664) - (2,664)
Equipment maintenance (2,820) - (2,820) (999) - (999)
Management fees - (222) (222) - (455) (455)
Other (11,020) (896) (11,916) (3,895) - (3,895)
Depreciation and (4,116) (4,765) (8,881) (2,305) (846) (3,151)
amortisation

Operating profit/(loss) 16,088 (5,883) 10,205 5,952 (1,301) 4,651

Interest income 240 - 240 3 - 3
Finance costs - (100,246) (100,246) - (35,433) (35,433)
Other finance costs (8,311) (2,706) (11,017) (4,025) (592) (4,617)

Profit/(loss) before tax 8,017 (108,835) (100,818) 1,930 (37,326) (35,396)

Taxation 4 (4,856) 1,354 (3,502) (20) - (20)

Profit/(loss) for the period 3,161 (107,481) (104,320) 1,910 (37,326) (35,416)

Basic and diluted
Earnings/(loss) per share 5 6.7c (228.8c) (222.1c) 7.9c (155.1c) (147.2c)

All amounts relate to continuing operations.

Consolidated Balance Sheet

At 31 December 2007

Unaudited
2007 2006
Note $000 $000
Non-current assets
Goodwill 7 76,049 35,871
Other intangible assets 8 69,405 51,885
Property, plant and equipment 9 62,659 34,156
Other non-current assets 949 589
Deferred tax 7,008 449
216,070 122,950
Current assets
Inventories 590 451
Trade and other receivables 10 17,846 10,305
Cash and cash equivalents 15,054 9,067
33,490 19,823

Total assets 249,560 142,773

Current liabilities
Borrowings 11 (15,686) (9,343)
Acquisition-related liabilities 12 (7,801) (6,629)
Trade and other payables 13 (12,555) (4,868)
Current tax (1,918) (367)
Deferred revenue (1,324) (527)
(39,284) (21,734)
Non-current liabilities
Borrowings 11 (46,479) (141,911)
Acquisition-related liabilities 12 (1,066) (4,362)
Other non-current liabilities (222) (104)
Deferred tax (15,107) (2,855)
(62,874) (149,232)

Total liabilities (102,158) (170,966)

Net assets/(liabilities) 147,402 (28,193)

Shareholders' equity - EAG Limited
Share capital 1,339 -
Share premium 253,603 -
Capital redemption reserve (104,899) -
Translation reserves 1,821 -
Retained reserves (4,462) -
Unitholders' equity - EAG Holdings LLC
Preferred units - 6,895
Convertible note - 1,366
Translation reserve - (1)
Retained reserves - (36,453)
Total equity/(deficit) 15 147,402 (28,193)

Consolidated Cash Flow Statement

For the year ended 31 December 2007

Unaudited
2007 2006
Note $000 $000
Cash flows from operating activities
Operating profit before taxation 10,205 4,651

Depreciation of property, plant and equipment 3,782 2,007

Impairment loss on fixtures and fittings 334 298

Amortisation of intangible assets 4,765 846

Increase in provision for trade receivables 737 -

Share based compensation 755 -

(Increase)/decrease in inventories (90) 79

Increase in trade and other receivables (4,232) (1,366)

Increase in other non-current assets (90) (36)

(Decrease)/increase in trade and other payables (1,223) 361

Decrease in deferred revenue (261) (72)

Increase in other non-current liabilities 2,024 70

Cash generated from operations 16,706 6,838
Tax paid (746) (30)

Net cash inflow from operating activities 15,960 6,808

Cash flows from investing activities
Interest received 240 -
Purchases of property, plant and equipment (5,400) (2,288)
Acquisitions of businesses (61,676) (77,651)
Cash acquired with businesses 158 5,385
Net cash used in investing activities (66,678) (74,554)

Cash flows from financing activities
Proceeds from borrowings 104,000 84,950
Payment of debt issue costs - (2,181)
Repayment of borrowings (145,758) (3,533)
Borrowings under other financing arrangements - 344
Repayments of other financing arrangements (214) -
Payments of pre-acquisition debt on seller's behalf (20,170) -
Repayments of obligations under finance leases (643) (129)
Proceeds on issue of shares in EAG Limited 252,594 -
Dividends paid 6 (2,002) -
Payments to acquire equity interests (104,899) -
Share issue costs (17,599) -
Proceeds from issue of preferred units 238 -
Preferred unit issue costs - (48)
Proceeds from exercise of warrants 59 -
Interest paid (9,861) (3,191)
Net cash generated from financing activities 55,745 76,212

Net increase in cash and cash equivalents 5,027 8,466

Effects of exchange rate changes 960 (22)
Cash and cash equivalents at start of period 9,067 623
Cash and cash equivalents at end of period 14 15,054 9,067

Consolidated Statement of Recognised Income and Expense

For the year ended 31 December 2007

Unaudited
2007 2006
$000 $000

Gain on rescission of put option 135,679 -
Gain on redemption of preferred units 836 -
Redemption of paid in kind equity 1,907 -
Share based compensation 762 -
Exchange movements on translation of foreign subsidiaries 1,822 (2)
Net income/(expense) recognised directly in equity 141,006 (2)

Loss for the financial period (104,320) (35,416)

Total recognised income/(expense) for the period 36,686 (35,418)

Notes to the accounts

1. Basis of preparation

The financial information in these preliminary results does not constitute the
statutory accounts for the year ended 31 December 2007, but is derived from
those accounts which have been prepared in accordance with International
Financial Reporting Standards. Comparatives for the year ended 31 December 2006
are neither audited nor reviewed, as EAG Limited has not previously prepared
statutory accounts. The financial information for the year ended 31 December
2006 has been extracted from the supplementary admission document of EAG Limited
dated 25 June 2007. Statutory accounts for 2007 will be delivered to the
Companies Registry in Jersey after the company's Annual General Meeting. The
auditors have reported on the statutory accounts for the year ended 31 December
2007, their report was unqualified and did not contain statements under s111(2)
or s111(5) of the Companies (Jersey) Law 1991.

On 26 June 2007, EAG Limited completed its flotation on the AIM market of the
London Stock Exchange, when it acquired all of the operating subsidiaries of EAG
Holdings LLC. As a result of this reverse acquisition, EAG Limited became the
legal parent of the group, and EAG Holdings LLC became a legal subsidiary within
the group. The financial statements of EAG Limited represent a continuation of
the financial statements of EAG Holdings LLC and its former subsidiaries. The
results of subsidiaries acquired by EAG Holdings LLC during the year are
included in the consolidated income statement from the effective date of
acquisition. Former assets and liabilities are recognised and measured in the
consolidated financial statements at their pre-combination carrying amounts,
while former retained earnings and other equity balances are those immediately
before the reverse acquisition.

2. Segmental information

Unaudited
Revenue by origin 2007 2006
$000 $000

United States 57,843 28,222
Asia 13,350 1,148
Europe 6,803 -
Sales 77,996 29,370
Intra-segmental sales (8,797) (1,083)
Revenue 69,199 28,287

Unaudited
Revenue by destination 2007 2006
$000 $000

United States 49,252 27,139
Asia 13,346 1,148
Europe 6,601 -
Revenue 69,199 28,287

Unaudtied
Exchange rates 2007 2006

Average rate of exchange US$: £1 2.01 1.84
Closing rate of exchange US$ : £1 1.98 1.96

3. Special items

Unaudited
2007 2006
$000 $000

Management fees 222 455
Aborted acquisition expenses and legal costs 896 -
Amortisation of acquired intangible assets 4,765 846
Special items before interest and tax 5,883 1,301
Finance costs 100,246 35,433
Other finance costs 2,706 592
Special items before tax 108,835 37,326
Taxation (1,354) -
Special items after tax 107,481 37,236

Certain special items have been separately disclosed in order to present what
the board considers to be a more balanced perspective of the underlying trading
performance. Management fees represent payments to related parties prior to the
initial public offering. Aborted acquisition expenses and legal costs reflect
the decision to terminate the acquisition programme pending a full strategic
review of the business, as well as litigation expenses. Amortisation represents
the non-cash charge for intangible assets of acquisitions. Finance costs
represent the non-cash charge for the change in value of put options of EAG
Holdings LLC, which were classified as liabilities and offset by a capital
contribution to retained earnings in advance of the initial public offering.
Other finance costs represent dividends in kind on redeemable preferred units
and write-off of capitalised loan fees of EAG Holdings LLC, consequent on the
refinancing prior to the initial public offering. The tax credit represents the
impact of taxation on special items and deferred taxation on restructuring at
the initial public offering.

4. Taxation

Unaudited
2007 2006
$000 $000

Current tax 2,208 20
Deferred tax 1,294 -
3,502 20

Prior to the reorganisation and initial public offering, EAG Holdings LLC was
treated as a partnership for US income tax purposes and any profits were
distributed to its partners, who were responsible for income taxes on those
profits. Thereafter, tax is chargeable on EAG Limited as a corporation.

EAG Limited and its wholly owned subsidiary, EAG Finance (Ireland) Limited, are
resident and taxable in Ireland. However, the charge for taxation reflects the
risk that the Internal Revenue Code could require EAG Limited to be treated as
if it is also a US resident corporation following the reorganisation at the time
of the initial public offering, as the tax status has not yet been resolved.

5. Earnings/(loss) per share

Unaudited
2007 2006
$000 $000

Profit for the period before special items attributable to ordinary shareholders 3,161 1,910
Special items for the period (107,481) (37,326)
Loss for the period attributable to ordinary shareholders (104,320) (35,416)

Average number of shares in issue for basic earnings (shares) 46,963 24,053
Dilutive impact of share options outstanding (shares) - -
Average number of ordinary shares in issue (shares) 46,963 24,053

Earnings per share before special items - basic and diluted (cents) 6.7c 7.9c
Loss per share on special items - basic and diluted (cents) (228.8c) (155.1c)
Loss per share - basic and diluted (cents) (222.1c) (147.2c)

The equity share capital of EAG Limited comprises ordinary shares. Prior to the
initial public offering, the equity capital of EAG Holdings LLC comprised both
common units and preferred units with associated warrants convertible into
common units that were treated as equity interests. As a result of the reverse
acquisition, the capital structure is that of EAG Limited as at 31 December
2007, and of EAG Holdings LLC as at 31 December 2006.

On 2 June 2007, 419,287 ordinary shares were issued by EAG Limited to establish
its initial equity share capital. During the reverse acquisition prior to the
initial public offering, equity interests in EAG Holdings LLC were exchanged for
8,572,119 ordinary shares in EAG Limited, contingent interests in EAG Holdings
LLC were exchanged for 7,817,438 ordinary shares in EAG Limited, and a
convertible note in EAG Holdings LLC was converted into 2,800,000 ordinary
shares in EAG Limited. On 26 June 2007, EAG Limited issued 47,132,198 ordinary
shares in the initial public offering and issued 2,567,500 share options over
its ordinary shares.

In accordance with IAS 33, earnings per share have been presented on the basis
of EAG Limited's capital structure. As a result of the loss for the year ended
31 December 2007, potentially dilutive instruments have been excluded from the
calculation of diluted earnings per unit as their effect would be anti-dilutive.

6. Dividends

Unaudited
2007 2006
$000 $000

Dividend in kind paid to EAG Holdings LLC unitholders 249 437
Interim dividend paid for 2007 of 3.0c per share 2,002 -
Provision for withholding tax on interim dividend 622 -
2,873 437

7. Goodwill

Unaudited
2007 2006
$000 $000

At 1 January 35,871 1,933
Additions through acquisition 36,994 33,932
Effects of exchange rate changes 645 6
Deferred tax adjustments 2,444 -
Other 95 -
At 31 December 76,049 35,871

8. Other intangible assets

Unaudited
2007 2006
$000 $000
Cost
At 1 January 52,957 10,002
Additions through acquisition 21,672 42,940
Effects of exchange rate changes 613 15
At 31 December 75,242 52,957

Accumulated amortisation
At 1 January (1,072) (226)
Charge for the period (4,765) (846)
At 31 December (5,837) (1,072)

Net book value
At 31 December 69,405 51,885

9. Property, plant and equipment

Unaudited
2007 2006
$000 $000
Cost
At 1 January 37,007 21,117
Additions 5,400 2,838
Additions through acquisition 27,004 13,067
Disposals (50) (9)
Effects of exchange rate changes 210 (6)
At 31 December 69,571 37,007

Accumulated depreciation
At 1 January (2,851) (567)
Charge for the period (3,782) (2,007)
Impairment (334) (298)
Disposals 50 9
Effects of exchange rate changes 5 12
At 31 December (6,912) (2,851)

Net book value
At 31 December 62,659 34,156

10. Trade and other receivables

Unaudited
2007 2006
$000 $000

Trade receivables 14,870 8,549
Other receivables 791 287
Prepayments 2,165 1,367
Restricted cash 20 102
17,846 10,305

11. Borrowings

Unaudited
2007 2006
$000 $000

Term loans 54,906 101,591
Revolving credit facility 7,259 2,064
Convertible note - debt portion - 3,534
Warrant put option liability - 35,433
Redeemable preferred units - 7,778
Obligations under finance leases - 639
Other financial liabilities - 215
62,165 151,254

Borrowings - current 15,686 9,343
Borrowings - non-current 46,479 141,911
62,165 151,254

EAG Limited and its subsidiary, EAG Finance (Ireland) Ltd, had a $140m
multi-currency secured credit facility, comprising a $125m term loan facility
for acquisition purposes and a $15m revolving credit facility for working
capital and general corporate purposes. At 31 December 2007, there was $57.0m
drawn on the loan facility and $7.5m drawn on the revolving facility, together
with accrued interest less unamortised loan fees. Subsequent to the year end,
the facilities have been renegotiated, with the term loan facility reduced from
$125m to $60m and the revolving credit facility unchanged at $15m. The annual
interest rate will be LIBOR plus 350 basis points on both facilities.

12. Acquisition-related liabilities

Unaudited
2007 2006
$000 $000

Acquisition-related liabilities - current 7,801 6,629
Acquisition-related liabilities - non-current 1,066 4,362
8,867 10,991

The acquisition related liabilities comprise deferred consideration owing to
vendors of acquired businesses and other related payables.

13. Trade and other payables

Unaudited
2007 2006
$000 $000

Trade payables 1,881 915
Accrued payroll and related liabilities 4,063 2,371
Sales and other taxes 267 277
Other accrued liabilities 6,344 1,305
12,555 4,868

14. Reconciliation of net cash flow to movement in net debt

Unaudited
2007 2006
$000 $000

At 1 January (142,188) (30,163)
Net increase in cash and cash equivalents 5,987 8,444
Net decrease/(increase) in long-term loans 46,685 (72,162)
Net increase in revolving credit facility (5,195) (7,893)
Net payments on finance leases 639 -
Finance leases assumed with acquisitions - (639)
Net decrease/(increase) in other financing arrangements 215 (215)
Net decrease/(increase) in put option liability 35,433 (35,433)
Net decrease/(increase) in redeemable preferred units 7,778 (592)
Debt proportion of convertible notes converted to equity 3,535 (3,535)
At 31 December (47,111) (142,188)

Net debt comprises:
Cash and cash equivalents 15,054 9,067
Revolving credit facility (7,259) (2,064)
Term loans (54,906) (101,591)
Finance lease obligations - (640)
Convertible note - (3,534)
Warrant put option liability - (35,433)
Redeemable preferred units - (7,778)
Other financing arrangements - (215)
At 31 December (47,111) (142,188)

15. Consolidated Statement of Changes in Shareholders' Equity

Unaudited
2007 2006
$000 $000

Total equity at start of period (28,193) 4,218
Loss for the period (104,320) (35,416)
Proceeds on issue of shares in EAG Limited 254,942 -
Gain on rescission of put option 135,679 -
Gain on redemption of preferred units 836 -
Redemption of paid in kind equity 1,907 -
Share based compensation 762 -
Exchange movements on translation of foreign subsidiaries 1,822 (1)
Dividends (2,873) (437)
Redemption of common units (104,899) -
Recognition of equity component of convertible loan notes - 1,366
Exchange of convertible loan notes for equity 3,534 -
Redemption of interest (4,900) -
Issue of preferred units 238 1,640
Payment of dividends in kind 249 437
Redemption of units (7,382) -
Total equity at end of period 147,402 (28,193)

16. Acquisitions

Accurel Systems International Corporation ("Accurel")

On 1 May 2007, the group purchased the trade and assets of Accurel for total
consideration of $12.7m. This purchase has been accounted for as an acquisition.
Accurel was fully integrated into an existing group site and the results cannot
be reliably ascertained from the date of acquisition. If Accurel had been owned
from the beginning of the financial year, then it would have contributed an
additional $3.0m to revenue and $1.1m to earnings before interest, tax,
depreciation and amortisation. Other intangible assets were recognised at their
respective fair values where these could be measured reliably. The residual
excess over the net assets acquired is recognised as goodwill. The fair value
adjustments contain some provisional amounts which are subject to finalisation
within 12 months of the date of acquisition.

Provisional
Book values Adjustments Fair values
$000 $000 $000

Other intangible assets - 7,460 7,460
Property, plant and equipment 4,257 (549) 3,708
Other non-current assets 2 - 2
Inventories 22 - 22
Trade and other receivables 1,025 - 1,025
Trade and other payables (884) - (884)
Finance lease obligations (1,905) - (1,905)
Deferred revenue (146) - (146)
Net assets acquired 2,371 6,911 9,282
Goodwill 3,415
Total consideration 12,697

Satisfied by:
Cash paid to seller 12,523
Directly attributable costs 174
Total consideration 12,697

Net cash flow arising on acquisition
Cash consideration 12,523
Cash and cash equivalents acquired -
12,523

Micro Electronic Failure Analysis Services, Inc. ("Mefas")

On 9 November 2007, the group acquired Mefas for total consideration of $28.8m
excluding net debt. This purchase has been accounted for as an acquisition. From
the date of acquisition to 31 December 2007, Mefas contributed $1.1m to revenue
and $0.5m to earnings before interest, tax, depreciation and amortisation. If
Mefas had been owned from the beginning of the financial year, then it would
have contributed an additional $7.2m to revenue and $1.9m to earnings before
interest, tax, depreciation and amortisation. Other intangible assets were
recognised at their respective fair values where these could be measured
reliably. The residual excess over the net assets acquired is recognised as
goodwill. The fair value adjustments contain some provisional amounts which are
subject to finalisation within 12 months of the date of acquisition.

Provisional
Book values Adjustments Fair values
$000 $000 $000

Other intangible assets - 9,200 9,200
Property, plant and equipment 10,156 1,064 11,220
Other non-current assets 49 - 49
Trade and other receivables 1,178 - 1,178
Debt acquired with acquisition (5,647) - (5,647)
Trade and other payables (3,136) - (3,136)
Deferred revenue (788) - (788)
Net assets acquired 1,812 10,264 12,076
Goodwill 16,706
Total consideration 28,782

Satisfied by:
Cash paid to seller 25,745
Deferred consideration 2,740
Directly attributable costs 297
Total consideration 28,782

Net cash flow arising on acquisition
Cash consideration 25,793
Cash and cash equivalents acquired (48)
25,745

DSL Labs, Inc. ("DSL")

On 26 November 2007, the group acquired DSL for total consideration of $14.1m
excluding net debt. This purchase has been accounted for as an acquisition. From
the date of acquisition to 31 December 2007, DSL contributed $1.1m to revenue
and $0.1m to earnings before interest, tax, depreciation and amortisation. If
DSL had been owned from the beginning of the financial year, then it would have
contributed an additional $10.3m to revenue and $nil to earnings before
interest, tax, depreciation and amortisation. Other intangible assets were
recognised at their respective fair values where these could be measured
reliably. The residual excess over the net assets acquired is recognised as
goodwill. The fair value adjustments contain some provisional amounts which are
subject to finalisation within 12 months of the date of acquisition.

Provisional
Book values Adjustments Fair values
$000 $000 $000

Other intangible assets - 3,600 3,600
Property, plant and equipment 8,966 (37) 8,929
Other non-current assets 111 - 111
Deferred tax asset 40 1,970 2,010
Inventories 23 - 23
Trade and other receivables 1,793 (206) 1,587
Debt acquired with acquisition (8,611) - (8,611)
Trade and other payables (3,447) - (3,447)
Deferred tax liability - (3,815) (3,815)
Deferred revenue (123) - (123)
Net (liabilities)/assets acquired (1,248) 1,512 264
Goodwill 13,843
Total consideration 14,107

Satisfied by:
Cash paid to seller 13,941
Directly attributable costs 166
Total consideration 14,107

Net cash flow arising on acquisition
Cash consideration 13,945
Cash and cash equivalents acquired (4)
13,941

White Mountain Labs LLC ("WML")

On 6 December 2007, the group acquired WML for total consideration of $3.6m
excluding net debt. This purchase has been accounted for as an acquisition. From
the date of acquisition to 31 December 2007, WML contributed $0.2m to revenue
and $0.1m to earnings before interest, tax, depreciation and amortisation. If
WML had been owned from the beginning of the financial year, then it would have
contributed an additional $2.4m to revenue and $0.3m to earnings before
interest, tax, depreciation and amortisation. Other intangible assets were
recognised at their respective fair values where these could be measured
reliably. The residual excess over the net assets acquired is recognised as
goodwill. The fair value adjustments contain some provisional amounts which are
subject to finalisation within 12 months of the date of acquisition.

Provisional
Book values Adjustments Fair values
$000 $000 $000

Other intangible assets - 1,412 1,412
Property, plant and equipment 2,673 474 3,147
Other non-current assets 10 - 10
Trade and other receivables 228 (11) 217
Debt acquired with acquisition (4,006) - (4,006)
Trade and other payables (226) - (226)
Net (liabilities)/assets acquired (1,321) 1,875 554
Goodwill 3,030
Total consideration 3,584

Satisfied by:
Cash paid to seller 2,662
Deferred consideration 765
Directly attributable costs 157
Total consideration 3,584

Net cash flow arising on acquisition
Cash consideration 2,768
Cash and cash equivalents acquired (106)
2,662

This information is provided by RNS
The company news service from the London Stock Exchange
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