Similarly, our team also devoted its attention to rationalise and integrate ASA into our BEST business unit. Both businesses are similar yet different. Supported by their manufacturing plants spanning Asia and Europe, they cater to different parts of the semiconductor and healthcare equipment manufacturers’ value chain. On the other hand, due to the different nature of their operations, ASA’s margins were lower relative to that of our BEST business. The profit dilution, which subsequently set in, affected the overall profit margin of our BEST business in FY2007. In the fourth quarter of FY2007, we divested our 11% equity interest in ASA and ceased the consolidation of its financial statements into ASTI. This divestment brought an exceptional gain of approximately $5.2 million to the Group.

The contributions arising from the acquisitions undertaken in FY2007 boosted ASTI’s revenues by 43.0%. Our revenues at the close of the financial year rose from $416.4 million (FY2006) to $597.2 million. Of this amount, contributions from the BEST business, which rose from $145.2 million in FY2006 to $146.9 million, accounted for about 24.6% of our aggregate revenue. The revenue growth in our distribution and services business was significantly higher, rising by 66.0% from $271.2 million to $450.3 million, accounting for 75.4% of our aggregate revenue.

The enlargement of our business also resulted in the incurrence of higher operating costs. This is largely due to the consolidation of the operating costs from both DGI and ASA, the incurrence of business reorganisation costs and higher financing expenses during the year. In FY2007, our operating expenses, excluding exceptional gain and share of results from associated companies, reported a 48.4% increase, rising from $61.1 million to $90.6 million. The increase in our  operating costs this year is due to the 63.5% rise in selling and marketing costs, a 66.0% increase in general and administrative costs and a foreign exchange loss of $2.3 million, due to the company’s business activities which are denominated in different currencies. ASTI does not enter into speculative foreign exchange activities.

The consolidation of DGI and ASA affected the profitability of ASTI in FY2007. The lower margins generated by the operations of DGI and ASA, the higher operating and business reorganisation costs and increased funding requirements diluted our overall profitability. For the financial year ended 31 December 2007, we reported a net profit attributable to members of the company of $5.4 million. This is significantly lower than the $12.8 million net profit after tax reported in the previous financial year.

Rationalising and integrating three groups of companies were by no means easy. Nevertheless, with the help and cooperation of all our employees, the exercise proceeded smoothly with minimal disruption to our business operations. The reorganisation of our BEST business, which is currently in progress, will complete by the second quarter of FY2008. The restructuring and reorganisation of both ASA and DGI, which commenced in FY2007, are set to continue. The new financial year will likely see more changes throughout the Group as we continue to realign our resources, refocus our business and raise our operating efficiencies. The reorganisation efforts this year have also reiterated the need for our business units to continually renew and revitalise themselves. To compete, we need to adopt proactive approaches to anticipate new market needs. In essence, we have to ensure that our businesses remain relevant so that they can continually create value. Guided by well-defined strategies and clear business directions, together we will spur the momentum of our growth engines through organic growth and business acquisitions.

The new financial year will bring with it many challenges and many opportunities. The weak global outlook in 2008 and expectations for a slower US economy will inevitably affect businesses in Asia. Escalating energy prices, fuelling rising global inflation, will inject increasing uncertainties. Nonetheless, amid crisis, opportunities abound. The resources and assets that we have accumulated in ASTI over the last few years will now stand us in good stead to pursue these opportunities and pave the way for the growth of ASTI in the years ahead."


Charles Cher Lew Siang
Group Chief Executive Officer