ENVIRONMENTAL GROUP LIMITED (THE) — M&A Activity 2007

Feb 15, 2007

ASX ANNOUNCEMENT

16 February 2007

EGL TO ACQUIRE LEADING AIR POLLUTION CONTROL SPECIALIST

The Environmental Group Limited (EGL) is pleased to announce that it has entered into a heads of agreement to acquire environmental services company. Total Air Pollution Control Pty Ltd (TAPC). The acquisition is expected to be completed by March 2007.

TAPC supplies a wide range of products and services associated with air pollution control which are used in most industries including resources, power generation, cement, metals, chemicals, food processing and foundry operations.

TAPC are sole Australian and New Zealand distributors for BHA Inc. a division of GE Energy, the world's largest supplier of parts and services for air pollution and emissions control including baghouse¹, electrostatic precipitators, and gas conditioning equipment.

By providing a range of solutions in reducing emissions, improving performance and increasing customer profitability, TAPC has developed a reputation for excellence in its field. The purchase of TAPC is subject to the completion of due diligence to the satisfaction of EGL.

The acquisition further underlines EGL's commitment to growth through the purchase and integration of pre-eminent environmental solution providers. TAPC's product development program is focused on solutions to a range of environmental challenges in the field of greenhouse gas abatement and pollution control which are practical, sustainable and beneficial to its clients and the community.

The addition of TAPC complements EGL's existing business and provides additional diversified quality revenues and profits. In addition the acquisition is expected to realise material efficiencies in EGL's existing gas cleaning division and promote new opportunities in the resources sector with the recently acquired EGL subsidiary, Mine Assist Pty Limited.

The acquisition will add approximately \$2 million in additional revenue this financial year and is expected to provide up to \$1.3 million of additional profits in the year to June 2008. The business will become an immediate and substantial contributor to revenues and profits.

The baghouse is a generic name for air pollution control equipment that is designed around the use of engineered fabric filter tubes, envelopes or cartridges in the dust capturing, separation or filtering process. Baghouses can be found in virtually every industry.

The terms of the purchase are as follows:

• An upfront initial component of \$3.5 million comprised of cash and equity;
• An earn-out component of 331/₃ % of the newly acquired entity's profit before tax for the financial years 2007 to 2011 inclusive, with the previous managing director remaining with the company in the role of General Manager.

The acquisition will be funded by a combination of equity and debt and will be immediately earnings per share accretive.

The TAPC purchase is the fourth acquisition by EGL of earnings accretive environmental product and services companies in the past 15 months.

Additional information on EGL can be found at its website www.environmental.com.au and on TAPC at www.tapc.com.au.

For further information, contact Mike Williamson on (02) 8858 3499 or 0414 542 589

Meter Ill-

Mike Williamson Managing Director and CEO

DELIVERING INNOVATIVE SOLUTIONS TO MANAGE OUR ENVIRONMENT

Visit our website: http://www.environmental.com.au