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Quarterly Financial Statements and Dividend Announcement For Period Ended 30 June 2008

Profit & Loss

Balance Sheet

Review of Performance

Overview

With continued slowing consumer demands, the Group's revenue for 2Q2008 closed at S$37.7 million, which represented decline of 26% from 1Q2008 and 19% from 2Q2007.

The Group's revenue for 1H2008 was S$88.5 million as compared with S$90.3 million in 1H2007. This was underpinned by higher equipment sales contributed by PSI Division, offset by lower revenue mainly from the SSP Division.

Excluding R&D costs and assets impairment provisions, the Group suffered an operating loss of S$3.2 million in 2Q208 and S$1.5 million in 1H2008 as compared to operating profits of S$3.1 million and S$5.5 million in 2Q2007 and 1H2007 respectively. The asset impairment of S$9.7 million arose mainly from slow-moving/obsolete stock as well as bad/doubtful debts. Overall, the Group's net loss was S$14.6 million in 2Q2008 and S$15.2 million in 1H2008.

The Group as at 30 June 2008 had net assets of S$64.0 million and net debt-to-equity ratio of 0.51. Operating cash flow for 1H2008 was positive at S$2.4 million, as compared to negative S$0.3 million in 1Q2008. This was the result of aggressive efforts to improve working capital management. Investing cash outflow for 1H2008 was S$4.3 million. Cash and cash equivalents at the end of 30 June 2008 stood at S$6.3 million.

Segmental Analysis

Substrates and System Packaging (SSP)

2Q2008

SSP Division was the Group's largest revenue contributor, accounting for 52.9% of the Group's revenue for 2Q2008. The Division recorded year-on-year reduction in sales of 25% in 2Q2008. Demand for substrates from major European customers had slowed considerably as they sustained long periods of losses due to sharp falls in DRAM prices.

SSP Division, excluding Qualitek, suffered a loss of S$5.7 million in 2Q2008 as compared to a profit of S$2.4 million in 2Q2007. Included in the S$5.7 million loss in 2Q2008 was R&D cost of S$0.7 million and asset impairment of S$4.2 million. The asset impairment of S$4.2 million mainly related to allowance for/write-off of slow-moving and obsolete stocks as well as bad/doubtful debts. At the operating level, profit margin was adversely affected by stiff competition and price reduction pressures amidst weakening USD and rising material costs. Lower yield as a result of change in product mix as the Division ramped up sales to customers in Taiwan/China also contributed to the operating loss.

Qualitek, which is principally in the PCB business, remained a challenge and was a drag on the performance of SSP Division. Revenue in 2Q2008 was 32% lower than the same period last year. Loss in 2Q2008 was S$3.1 million. Included in 2Q2008 results were allowance for doubtful debts and write-off of inventories of S$0.7 million. Excluding these items, operating loss in 2Q2008 was contained at 1Q2008 level of S$2.4 million, despite the S$0.8 million decrease in revenue.

1H2008

SSP Division was the Group's largest revenue contributor in 1H2008, accounting for 50.4% of the Group's revenue. The Division recorded year-on-year reduction in sales of 12% in 1H2008. The decrease in 1H2008 was mainly due to lower volume in 2Q2008 and price reduction pressures.

SSP Division, excluding Qualitek, suffered a loss of S$5.5 million in 1H2008 as compared to a profit of S$4.2 million in 1H2007. Included in the S$5.5 million loss in 1H2008 was R&D cost of S$1.4 million (1H2007: S$1.7 million) and asset impairment of S$4.2 million (1H2007: S$0.1 million).

Qualitek's revenue in 1H2008 was 30% lower than same period last year. Loss was S$5.4 million in 1H2008. Continuous actions are taken by the management to improve yield and manufacturing efficiency. In this regard, management had taken actions in late June 2008 to downsize the operations of Qualitek and reduced headcount by about 25%.

Precision and System Integration (PSI)

2Q2008

The Group's PSI Division revenue in 2Q2008 of S$11.0 million was 16% lower than that of 2Q2007 and 41% lower than 1Q2008. The decrease was mainly due to lower capital equipment sales in 2Q2008 as orders placed by customers in 4Q2007 were mostly completed and delivered in 1Q2008.

In 2Q2008, PSI Division suffered a loss of S$4.7 million, which included asset impairment of S$4.0 million (2Q2007: S$0.1million) mainly for slow-moving/obsolete equipments and components. Excluding the asset impairment and R&D costs, PSI Division suffered an operating loss of S$37,000 in 2Q2008 as compared to S$0.6 million of operating loss reported in the last corresponding period.

Precision and System Integration (PSI) (Cont'd)

1H2008

Backed by higher equipment sales in 1Q2008, PSI Division's revenue was S$29.7 million in 1H2008 as compared to S$24.8 million in 1H2007.

In 1H2008, excluding asset impairment of S$3.9 million (1H 2007: S$0.1 million) and R&D costs, the Division posted an operating profit of S$2.8 million as compared to an operating loss of S$1.2 million suffered in 1H2007. The turnaround in results was achieved with stringent cost controls as well as higher equipment sales achieved in 1H2008.

Materials and Services (MNS)

2Q2008

Revenue from MNS Division remained fairly stable, with a marginal decrease of 4% or S$0.3 million from S$7.1 million in 2Q2007 to S$6.8 million in 2Q2008.

The Division recorded a loss of S$0.9 million in 2Q2008 as compared to a profit of S$0.6 million in 2Q2007. Included in the loss for 2Q2008 was impairment loss of S$0.9 million (2Q2007: S$0.2 million). Excluding the impairment loss, the Division suffered a marginal operating loss of S$48,000 in 2Q2008 despite rising material costs and price reduction pressures.

1H2008

The Division experienced a slight decline in revenue from S$14.7 million in 1H2007 to S$14.3 million in 1H2008.

The Division suffered a loss of S$0.6 million in 1H2008 as compared to a profit of S$1.4 million in 1H2007. Included in the loss for 1H2008 was impairment loss of S$0.9 million (1H2007: S$0.2 million). The impairment loss of S$0.9 million in 1H2008 was largely doubtful/disputed debts. Excluding the impairment loss, the Division achieved an operating profit of S$0.3 million in 1H2008 despite rising material costs and price reduction pressures.

The accompanying notes form an integral part of these financial statements. The accompanying notes can be found in the 2Q Financial Statement, please click here for details.

For the First Quarter 2008 Financials, please click here.