Final Results

IQE PLC
17 March 2008




17 March 2008



IQE plc



54% revenue jump drives return to operating profitability, outlook strong

IQE plc (AIM: IQE, 'the Group'), the leading global supplier of advanced wafer
products and wafer services to the semiconductor industry, has announced its
Preliminary Results for the year ended 31 December 2007.



FINANCIAL HIGHLIGHTS

•  Revenues jump 54% to £50.1m (2006: £32.4m), up 69% at constant exchange rates

•  Continued margin improvement with gross profit up 250% to £8.2m (2006: £2.3m)

•  EBITDA profit up £5.6m at £3.9m (2006: loss £1.7m) before exceptional items

•  Operating profit up £4.6m at £0.6m (2006: loss £4.0m) before exceptional 
   items

•  Cash generated from operations £1.9m (2006: outflow £4.4m)


BUSINESS HIGHLIGHTS

•  Return to operating profitability demonstrating powerful, highly
   leveraged business model

•  Year of strong delivery on strategy

•  Continued focus on high growth global markets driven by high speed
   wireless communications, mobile devices, solar cells and solid state lighting

•  Acquisitions made during 2006 successfully integrated into Group and
   contributed strongly

•  Firmly established as industry leader in advanced wafer outsourcing


TRADING OUTLOOK

•  Q1 2008 continuing strongly, with revenues currently running between
   30 to 40% ahead of 2007,

•  Market conditions continuing to show robust demand for Gallium
   Arsenide (GaAs) based products driven principally by 3G and other high speed
   wireless applications

•  Strong forward demand for GaAs wafers is a consequence of the rapidly
   increasing number of GaAs components in each high speed mobile communication
   device, resulting in demand growth for GaAs components which is significantly
   outstripping growth in the overall handset and wireless communication markets.

   Dr Drew Nelson, IQE Chief Executive, commenting on the results said:


'2007 saw the third consecutive year of substantial revenue growth averaging 50%
per annum and a return to operating profitability as a result of delivering on
our strategy, and our clear focus on high growth markets

'Our major markets have continued to be driven by the increasing demand for GaAs
based components for high speed, feature rich mobile devices that demand the
high levels of performance and functionality that our products deliver. IQE is
now widely recognised as the global market leader in advanced semiconductor
wafer outsourcing.

'Our strategy of focusing on rapidly growing technologies has given us a solid
base from which we can deliver continued and sustainable growth.

'Now that we are generating profits and cash from operations we have also put in
place significantly enhanced banking facilities to support our continued growth.
In the current economic climate, this new facility signals a resounding vote of
confidence in IQE's strategy, its business model and management team.

'We have maintained our strong growth throughout the first quarter of 2008, and
continue to see robust forward demand from our customers, particularly in the
high speed wireless communications sector. We are confident of another year of
strong growth.'



Contacts:


IQE plc                                                        [phone]
Drew Nelson
Phil Rasmussen
Chris Meadows

College Hill                                                   [phone]
Adrian Duffield/Ben Way

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

Panmure Gordon (UK) Limited                                    [phone]
Aubrey Powell/ Ashton Clanfield



NOTE TO EDITORS

IQE plc is the leading global supplier of advanced semiconductor wafers with
products that cover a diverse range of applications. It is able to provide a
'one stop shop' for the wafer needs of the world's leading compound
semiconductor manufacturers, who in turn use these wafers to make the chips
which form the key components of virtually every high technology system. IQE has
particular focus on the growing global wireless sector for applications
including; mobile handsets, wireless infrastructure, Wi-Fi, WiMAX, base
stations, GPS and satellite communications; as well as for the optical
communication sector including; optical storage (CD, DVD), laser optical mice,
laser printers & photocopiers, thermal imagers, leading-edge medical products,
bar-coding, high efficiency LEDs and advanced 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 is unique in being able to supply
wafers using all of the leading crystal growth technology platforms including
Metal Organic Vapour Phase Epitaxy (MOVPE) and Molecular Beam Epitaxy (MBE) and
the Group is able to leverage its global purchasing volumes to reduce the cost
of raw materials.

IQE also provides bespoke R&D services to deliver customized 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. This
is backed by a strategy of duplicating each key product processes over multiple
sites to assure customers of security of supply as well as provide compelling
customer benefits in terms of flexibility and predictability of cost, thereby
significantly reducing operating risk.

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



PRELIMINARY RESULTS 2007


1. OVERVIEW

2007 represented a major milestone for the Group as our strategy to focus on
high speed mobile products delivered solid results and clearly demonstrated the
strength of our highly geared business model.

The Group returned to operating profitability through a strong focus on high
growth markets. 2007 represents the third year of strong revenue growth
averaging 50% per annum. The acquisitions made during 2006 were quickly and
efficiently integrated within the Group, and have contributed strongly to IQE's
strategic positioning and financial performance.

Following these acquisitions the Group now has a global footprint and is widely
recognised as the leading player within the compound semiconductor wafer
industry.  Furthermore, IQE is unique in being able to offer a comprehensive
product portfolio using both MOVPE and MBE production platforms across
multi-site manufacturing facilities. Our global presence is further enhanced
through our network of sales locations which provide access to all the world's
major economic regions.

IQE has also been successful in reducing its business risk by expanding the
customer base and widening the product portfolio.  This diversification means
that IQE's sales are now much more closely correlated with the end markets and
in particular the market for high speed wireless communication.


2. RESULTS

Revenue of £50.1m was significantly higher than 2006 (£32.4m), representing a
year on year increase of 54% (69% underlying increase before the impact of
foreign exchange translation).

From this 54% increase in revenues the business delivered a 250% increase in
gross profit from £2.3m to £8.2m. This substantial improvement clearly
demonstrates the powerful leverage of the business model and the benefit of
improved efficiencies.

Selling, General and Administrative expenses ('SG&A') were £8.1m (2006: £6.1m),
which represents 16.1% of sales (2006: 18.7%).  Before exceptional items SG&A
increased by £1.4m due to the inclusion of the two businesses acquired during
2006.   In addition, during 2007 we incurred £0.4m of one-off exceptional costs
relating to the relocation of our Singapore operation to a new state-of-the-art
facility which provides considerable room for expansion, This relocation is on
track and will be completed during 2008. In 2006 we recognised an exceptional
credit of £0.2m relating to the release of an onerous lease provision.

EBITDA (before exceptional items) for the year was £3.9m (2006: EBITDA loss of
£1.7m), and operating profit (before exceptional items) was £0.6m (2006:
operating loss of £4.0m). This strong financial performance and return to
operating profitability reflect that 2007 has been a milestone year for the
Group and marks a strong delivery against a robust strategy.

Including interest and exceptional costs, the retained loss was £0.9m (2006:
loss £4.0m), representing a loss per share of 0.21 pence  (2006: 1.14 pence loss
per share)

Working capital was carefully managed and increased by only £0.8m on a £17.7m
increase in revenues.  This limited absorption of cash into working capital has
assisted with the strong conversion of our operating profit into a positive cash
inflow from operating activities of £1.2m (2006: outflow of £4.7m)

Capital expenditure increased to £7.8m (2006: £1.4m) as it included £2.7m
relating to the purchase of property and an investment of £3.6m in additional
capacity in specific areas to address growing demand for specific customers.
The major items of capital expenditure were funded by £5.5m of new loans.  The
Group also invested £1.4m (2006: £0.2m) in development expenditure which has
been capitalised.

Net debt at December was £14.2m (2006: £5.9m).  Shortly after the year end, the
Group appointed Lloyds TSB Corporate Markets as its principal banker and agreed
new, significantly increased banking facilities of up to £15.5m for the purpose
of financing growth and working capital.


3. STRATEGY

IQE's strategy is to focus on fast growth, high volume technologies, and in
particular, high speed wireless communications and consumer opto electronics.
In addition, the Group is also actively engaged in developing advanced solar
cell technology, ultra efficient LEDs and ultra high speed microprocessor and
memory chip materials technology for these fast growth, high volume emerging
markets.

In order to provide customers with the most competitive outsource wafer service
globally, IQE has developed a unique set of advantages, including :


•  offering a complete range of products covering all major applications;

•  offering  global multi-site production capabilities in the primary
   manufacturing platforms to allow efficient capacity planning and for disaster
   scenario contingency;

•  maintaining a broad contact base with access to all the key global markets;

•  delivering benefits from economies of scale including purchasing power
   and research and development efficiencies;

•  promoting the sharing of best practices and innovation to deliver
   improved operating and cost efficiencies; and

•  providing surge capacity to meet the expected growth in demand in the
   mobile device sector and other high volume activities

This strategy has delivered tangible results in the current generation of
wireless products that have dominated IQE's output during 2007 and will continue
to deliver on current and next generation products. In addition, IQE is also
able to leverage its large manufacturing capacity in order to deliver tangible
benefits to customers, staff and shareholders alike.


4. PRODUCTS AND MARKETS

Our product roadmap and strategy continues to be driven by four key market
dynamics, all of which have fast growth, high volume prospects:

•         The increasing adoption of high speed mobile communications, including
3G, WiFi , WiMAX, WiBro, GPS and other wireless technologies .  As mobile
technologies continue to advance at an enormous pace with new features
constantly emerging, the role of advanced compound semiconductor materials has
becomes critical in enabling high speed data processing whilst maintaining low
levels of power consumption. IQE's products are absolutely critical in the drive
to 3G and beyond, along with the need for backward compatibility and the speed
and power to accommodate features such as high resolution imaging, video, high
speed wireless data access, VoIP and satellite navigation. Each high speed
communication device now contains multiple numbers of GaAs components compared
with earlier generations, creating a powerful demand driver for GaAs components
and wafers which far outsrips the growth of the overall communications market.

•         The ubiquity of applications for high volume semiconductor lasers,
including HD DVD, laser mouse, laser projection, and office and industrial
applications. In particular, laser projection is viewed as one of the most
exciting applications of this technology, eventually being incorporated into
mobile handsets

•         The accelerating drive for clean, efficient and sustainable energy
sources (solar cells), and highly efficient light sources (LEDs) in order to
reduce the impact on global warming, reliance on fossil fuels and provide a much
cleaner environment.  Compound semiconductors are playing a critical role, and
IQE are involved in leading edge development for these applications, having
achieved world leading results through its partners for solar cell efficiencies.

•         The continuing need for higher speed, more powerful microprocessors
and higher speed, ultra high density memories. This is driving the demand for
new materials solutions based on silicon substrates including the incorporation
of compound semiconductors directly onto silicon substrates.  IQE has
established powerful positions in both these technologies, working with some of
the biggest names in the industry


Each of these markets has very powerful growth potential, with wireless being
the current key driver.


5. OPERATIONAL UPDATE

Following the acquisitions in 2006, we completed a number of key operational
initiatives during 2007 to enhance the Group's productive efficiency, and
leverage the inherent large manufacturing capacity in order to offer our
customers multi-site, multi-platform manufacturing solutions.  Most notably
these successes include :

•  the successful integration of both acquisitions, with both subsidiaries 
   contributing strongly during 2007;

•  securing a new state-of-the-art manufacturing facility in Singapore on very 
   attractive terms, with the successful installation of equipment and initial
   manufacturing already commenced;

•  the successful alignment of key switch technologies across the Group
   for dual-site manufacture for several customers;

•  the transfer to, and successful product qualification of, advanced HBT
   (power amplifier) technology in Cardiff from New Jersey;

•  the successful management of ramping production to satisfy rapid
   growth in customer demand and;

•  the successful completion of several major R&D projects which are
   leading to significant follow on awards.



6. TRADING OUTLOOK

Following the successful integration of the two major acquisitions made in 2006,
the Group is widely recognised as the global market leader in advanced wafer
outsourcing. The successes of 2007 have provided clear evidence of our core
strategy delivering tangible results with a third consecutive year of
substantially increased revenue and a return to operating profitability. In
particular, with the successful qualification of various customers and new tools
during Q4'07, the year ended very strongly.

Trading for the first quarter of 2008 has continued strongly, with revenues
currently running between 30-40% ahead of the equivalent period last year, and
the market conditions for IQE's products continuing to show robust demand driven
principally by 3G and other high speed wireless applications.

Whilst we remain highly focussed on the wireless mobile communications markets,
there are also a number of other key high growth and high volume opportunities
being rapidly developed across the Group.  As a result, we look forward to
another year of high growth and sustained profitability.


PRELIMINARY RESULTS FOR
YEAR ENDED 31 DECEMBER 2007


                            
CONSOLIDATED INCOME                     6 months to         6 months to            12 months to            12 months to 
STATEMENT                               31 Dec 2007         31 Dec 2006             31 Dec 2007             31 Dec 2006
(All figures GBP000s)        Note         Unaudited           Unaudited               Unaudited               Unaudited


Revenue                                      26,385              17,830                  50,065                  32,421
Cost of sales                              (22,031)            (16,747)                (41,838)                (30,072)

Gross profit                                  4,354               1,083                   8,227                   2,349

Selling, general and       
administrative expenses
(including exceptional
items)                        3             (4,243)             (3,263)                 (8,053)                 (6,050)

Operating profit/(loss)                         111             (2,180)                     174                 (3,701)
Operating profit/(loss) %                       0.4              (12.2)                     0.3                  (11.4)


Operating profit/(loss)                         550             (2,180)                     613                 (3,956)
before exceptional items
Exceptional items             3               (439)                   0                   (439)                     255

Operating profit/(loss)                         111             (2,180)                     174                 (3,701)
Operating profit/(loss) %         
before exceptional items                        2.1              (12.2)                     1.2                  (12.2)


Finance income                                   53                  55                      58                     104
Finance costs                                 (523)               (224)                 (1,094)                   (393)

Loss for the period                          
attributable to equity
shareholders                                  (359)             (2,349)                   (862)                 (3,990)


Basic Loss Pence per          4              (0.08)              (0.61)                  (0.20)                  (1.14)
Ordinary 1p Share
Diluted Loss Pence per        4              (0.08)              (0.61)                  (0.20)                  (1.14)
Ordinary 1p Share

EBITDA is calculated as
follows:

Loss for the period             
attributable to equity
shareholders                                  (359)             (2,349)                   (862)                 (3,990)
Share based payments                            372                 330                     571                     501
Exceptional items                               439                   0                     439                   (255)
Net interest payable                            469                 169                   1,036                     289
Depreciation of tangible     
fixed assets                                  1,289                 935                   2,400                   1,617
Amortisation of intangible      
fixed assets                                    150                  90                     307                     136

Earnings before interest,       
taxes, depreciation,
amortisation and
exceptionals (EBITDA)                         2,360               (825)                   3,891                 (1,702)




CONSOLIDATED STATEMENT OF         
RECOGNISED                              6 months to         6 months to            12 months to            12 months to
INCOME AND EXPENSE                      31 Dec 2007         31 Dec 2006             31 Dec 2007             31 Dec 2006
(All figures GBP000s)                     Unaudited           Unaudited               Unaudited               Unaudited

Loss for the period                           (359)             (2,349)                   (862)                 (3,990)
Currency translation           
differences on foreign
currency net investments                      (510)               (603)                   (743)                   (916)

Total recognised expense for      
the period                                    (869)             (2,952)                 (1,605)                 (4,906)



                                                                                 As At                           As At
CONSOLIDATED BALANCE SHEET                                                 31 Dec 2007                     31 Dec 2006
(All figures GBP000s)                                                        Unaudited                       Unaudited

Non-current assets :
Intangible assets                                                               12,110                          11,095
Tangible assets                                                                 17,243                          11,803

Total non-current assets                                                        29,353                          22,898


Current assets :
Inventories                                                                      7,643                           8,580
Trade and other receivables                                                     10,599                           6,480
Cash and cash equivalents                                                           11                           4,071

Total current assets                                                            18,253                          19,131


Total assets                                                                    47,606                          42,029


Current liabilities :
Borrowings                                                                     (5,911)                         (2,754)
Trade and other payables                                                      (10,354)                         (8,041)

Total current liabilities                                                     (16,265)                        (10,795)


Non-current liabilities :
Borrowings                                                                     (8,259)                         (7,234)
Deferred income                                                                  (122)                           (160)

Total non-current liabilities                                                  (8,381)                         (7,394)


Total liabilities                                                             (24,646)                        (18,189)


Net assets                                                                      22,960                          23,840


Shareholders' equity :
Ordinary shares                                                                  4,310                           4,299
Share premium                                                                  172,183                         172,030
Other reserves                                                                 (1,092)                           (910)
Profit and loss account                                                      (152,441)                       (151,579)

Total shareholders' equity                                                      22,960                          23,840





Approved by the Directors of IQE plc on
16 March 2008

                             
CONSOLIDATED CASH FLOW                  6 months to         6 months to            12 months to            12 months to 
STATEMENT                               31 Dec 2007         31 Dec 2006             31 Dec 2007             31 Dec 2006
(All figures GBP000s)       Note          Unaudited           Unaudited               Unaudited               Unaudited

Cash flows from operating
activities :
Cash inflow/(outflow) from  
operations                    6               1,435               (982)                   1,828                 (4,418)
Interest received                                53                  55                      58                     104
Interest paid                                 (335)               (198)                   (763)                   (367)

Net cash inflow/(outflow)         
from operating activities                     1,153             (1,125)                   1,123                 (4,681)


Cash flows from investing
activities :
Purchase of subsidiary          
undertakings                                      0            (11,227)                       0                (11,227)
Cash acquired in subsidiary      
undertakings                                      0               1,023                       0                   1,023
Development expenditure                       (642)               (222)                 (1,372)                   (222)
Investment in other               
intangible fixed assets                        (20)                   0                    (20)                       0
Purchase of tangible fixed      
assets                                      (3,840)               (454)                 (7,814)                 (1,431)
Proceeds from sale of    
tangible fixed assets                            97                  91                      97                     251

Net cash used in investing      
activities                                  (4,405)            (10,789)                 (9,109)                (11,606)


Cash flows from financing
activities :
Issues of ordinary share       
capital                                          26              15,868                     154                  15,920
Loans and leases received/    
(repaid)                                        952             (1,077)                   2,750                 (1,807)

Net cash generated from      
financing activities                            978              14,792                   2,904                  14,113


Net (decrease)/increase in      
cash and cash equivalents                   (2,274)               2,878                 (5,082)                 (2,174)

Cash and cash equivalents            
at the beginning of the period                1,263               1,193                   4,071                   6,245


Cash and cash equivalents  
at the end of the period      7             (1,011)               4,071                 (1,011)                   4,071





NOTES TO THE PRELIMINARY RESULTS

1        BASIS OF PREPARATION

These unaudited preliminary results have been prepared under the historical cost
convention and in accordance with International Financial Reporting Standards
('IFRS') and interpretations in issue at 31 December 2007.

The Group published an IFRS transition statement on 14 August 2007 which set out
the effect of adopting IFRS for the Group, the basis of preparation, the
accounting policies, and details of significant adjustments in respect of the
opening balance sheet at 1 January 2006, the results for the year ended 31
December 2006 and the balance sheet at 31 December 2006.   These are detailed in
Notes 8 to 10 below.

The preliminary results were approved by the Board of Directors and the Audit
Committee on 16 March 2008.  The preliminary results do not constitute statutory
accounts within the meaning of the Companies Act 1985 and have not been audited.
Comparative figures in the results for the year ended 31 December 2006 have
been taken from the IFRS preliminary results transitional statement. All periods
presented are unaudited.

The preliminary results will be announced to all shareholders on the London
Stock Exchange and published on the Group's website on 17 March 2008.   Copies
will be available to members of the public upon application to the Company
Secretary at Pascal Close, Cypress Drive, St Mellons, Cardiff CF3 0LW.



                                                                                    12 months to  12 months to
2     SEGMENTAL INFORMATION                                                          31 Dec 2007   31 Dec 2006
      (All figures GBP000s)                                                            Unaudited     Unaudited

      Revenue by business segment :
      Wireless                                                                            38,088        20,271
      Optoelectronics                                                                      9,212        10,066
      Electronics                                                                          2,765         2,084

      Total revenue                                                                       50,065        32,421


      Operating proft/(loss) by business segment :
      Wireless                                                                             3,583         (166)
      Optoelectronics                                                                    (2,840)       (2,361)
      Electronics                                                                          (569)       (1,174)

      Total operating profit/(loss)                                                          174       (3,701)



                                                                                    12 months to  12 months to
3     EXCEPTIONAL ITEMS                                                              31 Dec 2007   31 Dec 2006
      (All figures GBP000s)                                                            Unaudited     Unaudited

      Exceptional items comprise :
      Relocation costs                                                                       439             0
      Onerous lease provisions                                                                 0         (255)

      Exceptional items (included in selling, general
      and administrative expenses)                                                           439         (255)
                                          

The exceptional charge of £439,000 in 2007 relates to the one-off costs incurred
in relocating the Singapore operation to a new state-of-the-art facility.  The
relocation is progressing according to plan and will be completed during 2008.

The exceptional credit of £255,000 in 2006 relates to the release of an onerous
lease provision in respect of a property which the Gropup has vacated.



4    LOSS PER SHARE                               6 months to      6 months to     12 months to     12 months to
                                                  31 Dec 2007      31 Dec 2006      31 Dec 2007      31 Dec 2006
                                                    Unaudited        Unaudited        Unaudited        Unaudited

     Loss for the period GBP 000s                       (359)          (2,349)            (862)          (3,990)


     Weighted average number of ordinary shares   430,840,183      315,976,014      430,601,406      350,729,318
     Diluted share options                         14,883,360        8,593,469       14,883,360        8,593,469

     Adjusted weighted average number of
     ordinary shares                              445,723,543      324,569,483      445,484,766      359,322,787

     Basic loss pence per share                        (0.08)           (0.61)           (0.20)           (1.14)
     Diluted loss pence per share                      (0.08)           (0.61)           (0.20)           (1.14)


Basic loss per share is calculated by dividing the loss attributable to ordinary
shareholders by the weighted average number of ordinary shares during the
period.  Diluted loss per share is calculated by adjusting the weighted average
number of ordinary shares in issue on the assumption of conversion of all
dilutive potential ordinary shares.

IAS 33 requires the presentation of diluted Loss Pence per Share when a company
could be called upon to issue shares that would decrease net profit or increase
net loss per share. For a loss-making company with outstanding share options,
net loss per share would only be increased by the exercise of the out of the
money options. Since it seems inappropriate to assume that option holders would
act irrationally, no adjustment has been made to diluted Loss Pence per Share
for out of the money share options.


5     STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY       6 months to   6 months to  12 months to  12 months to
                                                         31 Dec 2007   31 Dec 2006   31 Dec 2007   31 Dec 2006
      (All figures GBP000s)                                Unaudited     Unaudited     Unaudited     Unaudited

      At the beginning of the period                          23,430        10,595        23,840        12,325

      Loss for the period attributable to equity               (359)       (2,349)         (862)       (3,990)
      shareholders
      Share option costs credited to reserves                    373           329           571           501
      Shares issued net of issue costs                            26        15,868           154        15,920
      Net exchange differences offset in reserves              (510)         (603)         (743)         (916)

      At the end of the period                                22,960        23,840        22,960        23,840


                                                         6 months to   6 months to  12 months to  12 months to
6     CASH GENERATED FROM OPERATIONS                     31 Dec 2007   31 Dec 2006   31 Dec 2007   31 Dec 2006
      (All figures GBP000s)                                Unaudited     Unaudited     Unaudited     Unaudited

      Operating loss                                             111       (2,180)           174       (3,701)

      Depreciation of tangible assets                          1,289           935         2,400         1,618
      Amortisation of intangible assets                          183            90           307           136
      Loss/(gain) on sale of tangible assets                     (5)            24           (5)          (38)
      Government grants released                                (19)          (19)          (39)          (39)
      Non cash share based payments                              372           330           571           501

      Operating profit/(loss) before changes in                1,931         (820)         3,408       (1,523)
      working capital

      Decrease/(increase) in inventories                         451         (256)           937       (1,536)
      (Increase)/decrease in trade and other                 (2,058)         (361)       (4,118)       (1,930)
      receivables
      Increase/(decrease) in trade and other payables          1,111           455         1,601           571

      Cash inflow/(outflow) generated from operations          1,435         (982)         1,828       (4,418)



                                                                                           As At         As At
7     ANALYSIS OF NET DEBT                                                           31 Dec 2007   31 Dec 2006
      (All figures GBP000s)                                                            Unaudited     Unaudited

      Cash at bank and in hand                                                                 0         3,085
      Highly liquid investments                                                               11           986

      Total cash and cash equivalents                                                         11         4,071


      Overdraft                                                                          (1,022)             0
      Loans due after one year                                                           (7,862)       (7,226)
      Loans due within one year                                                          (5,151)       (2,731)
      Finance leases due after one year                                                     (89)           (7)
      Finance leases due within one year                                                    (45)          (24)

      Total borrowings                                                                  (14,170)       (9,988)


      Net debt                                                                          (14,159)       (5,917)




8     RECONCILIATION OF OPERATING LOSS FOR YEAR ENDED                                            
      31 DECEMBER 2006                                                                            12 months to
      UNDER UK GAAP TO IFRS                                                                        31 Dec 2006
      (All figures GBP000s)                                                                          Unaudited

      Operating loss per UK GAAP                                                                       (3,977)

      Capitalisation of development costs                                                                  222
      Amortisation of intangible assets                                                                  (136)
      Amortisation of goodwill                                                                             166
      Provision for holiday pay                                                                             24

      Operating loss per IFRS                                                                          (3,701)




9  RECONCILIATION             UK GAAP         IFRS 3             IAS 38             IAS 19       IFRS
   OF SHAREHOLDERS'      Re-formatted       Business  Intangible Assets  Employee Benefits
   EQUITY AT                            Combinations
   31 DECEMBER               
   2005UNDER UK
   GAAP TO IFRS
   (All figures GBP000s)    Unaudited      Unaudited          Unaudited          Unaudited  Unaudited

   Non-current assets :
   Intangible assets                0              0                183                  0        183
   Tangible assets              8,816              0               (62)                  0      8,754

   Total non-current       
   assets                       8,816              0                121                  0      8,937

   Current assets:
   Inventories                  4,312              0                  0                  0      4,312
   Trade and other receivables  3,404              0                  0                  0      3,404
   Cash and cash equivalents    6,245              0                  0                  0      6,245

   Total current assets        13,961              0                  0                  0     13,961

   Current liabilities:
   Borrowings                 (1,739)              0                  0                  0    (1,739)
   Trade and other payables   (4,616)              0                  0              (117)    (4,734)

   Total current liabilities  (6,355)              0                  0              (117)    (6,473)

   Non-current liabilities:
   Borrowings                 (3,646)              0                  0                  0    (3,646)
   Deferred income              (199)              0                  0                  0      (199)

   Provision for liabilities
   and charges                  (255)              0                  0                  0      (255)

   Total non-current
   liabilities                (4,100)              0                  0                  0    (4,100)

   Net assets                  12,323              0                121              (117)     12,325

   Shareholders' equity:
   Ordinary shares              3,163              0                  0                  0      3,163
   Share premium              157,264              0                  0                  0    157,262
   Other reserves               (509)              0                  0                  0      (509)
   Profit and loss account  (147,594)              0                121              (117)  (147,591)

   Total shareholders'
   equity                      12,323              0                121              (117)     12,325




                              UK GAAP                  IFRS 3             IAS 38             IAS 19       IFRS
10 RECONCILIATION        Re-formatted   Business Combinations  Intangible Assets  Employee Benefits
   OF SHAREHOLDERS'
   EQUITY AT 31
   DECEMBER 2006
   UNDER UK GAAP TO IFRS
   (All figures GBP000s)   Unaudited               Unaudited          Unaudited          Unaudited  Unaudited
   
   Non-current assets :
   Goodwill                    10,903                 (2,303)                  0                  0      8,600
   Intangible assets                0                   2,172                323                  0      2,495
   Tangible assets             11,861                       0               (58)                  0     11,803

   Total non-current
   assets                      22,764                   (131)                265                  0     22,898

   Current assets:
   Inventories                  8,580                       0                  0                  0      8,580
   Trade and other
   receivables                  6,480                       0                  0                  0      6,480
   Cash and cash        
   equivalents                  4,071                       0                  0                  0      4,071

   Total current assets        19,131                       0                  0                  0     19,131
   

   Current liabilities :
   Borrowings                 (2,754)                       0                  0                  0    (2,754)
   Trade and other payables   (8,162)                     214                  0               (93)    (8,041)

   Total current liabilities (10,916)                     214                  0               (93)   (10,795)

   Non-current liabilities :
   Borrowings                 (7,234)                       0                  0                  0    (7,234)
   Deferred income              (160)                       0                  0                  0      (160)

   Total                      (7,394)                       0                  0                  0    (7,394)
   non-current liabilities

   Net assets                  23,585                      83                265               (93)     23,840

   Shareholders' equity:
   Ordinary shares              4,299                       0                  0                  0      4,299

   Share premium              172,031                       0                  0                  0    172,031
   Other reserves               (910)                       0                  0                  0      (910)
   Profit and loss account  (151,834)                      83                265               (93)  (151,579)

   Total shareholders'
   equity                      23,585                      83                265               (93)     23,840



11   CONTINGENT LIABILITY

The Group received a claim in 2005 for approximately £1 million in respect of
national insurance contributions in relation to share options that were issued
in 1999.   Having sought legal opinion, the Board remains robust in its opinion
that the Group has meritorious defences to this claim.   Accordingly, no
provision has been made in the preliminary results for 2007.


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