Second Quarter Financial Statement And Dividend Announcement for the Period Ended 30/06/2008

Balance Sheet

Review of Performance

Profitability

The Group's revenue for the quarter ended 30 June 2008 declined 36% to $125.5 million from $196 million in 2007 as a consequent of our phased withdrawal from lower margin businesses. While its other businesses continue to grow, it was not enough to compensate for the drop in revenue from the lower margin business.

2Q08 gross profit declined 38% to $23.3 million from $37.6 million in 2Q07. Gross profit declined marginally to 18.6% from 19.2% in 2Q07. The company had brought down variable costs to mitigate the effect of the drop in revenue, but the company continues to bear the fixed costs of the excess capacity. This, coupled with mandatory increase in labour cost in Brazil and China, contributed to the reduced margin.

Distribution, administrative and other operating expenses declined by 24%, 22% and 30% respectively owing to cost saving from consolidation of manufacturing operations in Malaysia in Q108.

Finance cost declined 37% to 3.8 million from 6.1 million in 2Q07 due to lower interest rates and decline in outstanding debts as compared to the previous corresponding period.

Net profit attributable to shareholders declined to S$4.1 million from S$13.9 million in 2Q07 due to lower sales, fixed depreciation expenses and higher wage requirements in Brazil and China.

Financial position

Inventory levels rose slightly to $174.4 million from $171.1 million as at 31 December 2007 as the Group grew the Brazil business, and in anticipation of higher demand for ODM products, with several planned new project launches in 2H08.

Trade receivables declined due to lower sales and conscious efforts to retrieve payments from trade debtors.

Trade payables and accruals declined significantly to $48.2 million as at 30 June 2008 from $178.7 million as at 31 December 2007 as proceeds from rights issues were used to pay down suppliers.

Overall bank borrowings decreased to $338.9 million as at 30 June 2008 from $367.1 million as at 31 December 2007 as the Group progressively repaid its borrowings with cash from operations.

The Group maintained a cash balance of $24.1 million as at 30 June 2008 ( as at 31 December 2007: $47.5 million), which is in line with efforts to reduce bank borrowings.

Commentary On Current Year Prospects

The business environment in the short and medium term continues to be challenging, where demand is expected to soften further on the back of a global slowdown. Volatile currency exchange rates compounds business risks further. On the competitive front, more EMS companies are moving towards ODM services to offer better value.

The Group believes it has a strong head start in the ODM business. This, and the focus on the still strong emerging countries market, will help it ride out the uncertainties in the short and medium term.

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