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Dear Shareholders,
Last year I touched on two topics – the difficult operating environment and our convergence towards a China-centric business. On the first point, while operating conditions have stablised and demand picked up in the fourth quarter of FY2009, generally the market is still weak, especially in the first nine months of FY2009. Subsequently, in FY2009, ASTI’s revenue decreased by 17% to $428.7 million and we close the year with a net loss attributable to members of the Company of $3.7 million compared to the net loss of $14.7 million reported in the previous financial year.
The Group’s performance this year saw the impact of exceptional items amounting to $9.8 million. This comprises impairment losses on financial assets, investments, property plant and equipment and severance payments arising from restructuring of our businesses. Hence, despite a 20% decrease in operating expenses amounting to $16.2 million and a 32% decrease in financing costs amounting to $1.9 million, our bottom line remained red.
The consolidation efforts that commenced in 2008 continued into FY2009 during which difficult decisions were made and their implementation expedited. On 8 January 2010, we announced a proposed reverse takeover exercise of our associate company – Advanced Systems Automation Limited (“ASA”). Pending the approval of our shareholders and once completed, the company will become a textile manufacturing and processing company. ASTI’s interest will thereafter be reduced to a passive investment in this entity.
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Another area on our radar screen was the reduction of our reliance on bank borrowings. During the year, we drew on our cash to repay a portion of our bank borrowings. This resulted in a 25% or $20.1 million reduction in bank borrowings bringing our total bank borrowings from $81.3 million to $61.2 million at the close of FY2009.
Our China-centric focus has not changed. In fact, we will continue to pursue our expansion into the country. Our subsidiary, Dragon Group International Limited (“DGI”), with its firm footholds across China will spearhead this strategy. Presently, DGI accounts for approximately 77% of our total revenue and this number is poised to grow. The balance being 23% of our revenue comprise contribution from our Backend Equipment Solutions and Technologies (“BEST”) business.
Promising strong growth this year, on 5 March 2010, China’s Premier Wen said the government will combat inflation and risks to banks to keep the rebound in the world’s third largest economy on track. In his report to China’s legislature, Premier Wen announced a growth target of 8% in a “crucial year” for recovery. He said stimulus spending and easy credit will continue because the basis of renewed global growth is still weak.
Our conviction in China’s growing potentials were further reiterated through Premier Wen’s promise to boost domestic consumer spending and the creation of high-tech industry to reduce reliance on exports and investment to drive growth. Promising to open more areas of the economy to foreign investors, China’s planning agency said it will guide investors to high-tech fields, clean energy and environmental protection and it hopes to attract US$96 million in foreign direct investments in 2010.
As the world gyrates towards China, we are already established in the country. The government’s focus to increase consumer spending and its commitment to create high-tech industry will release numerous windows of opportunities for us. As the country races to architect and further upgrades its infrastructural and technological highways, we are ready to support the country’s growth through our extensive suite of products and services offerings from both our BEST and Distribution & Services businesses. In essence, having invested to build our Group’s infrastructure and presence over the years, our system is ready to support the government’s economic growth initiatives. At this point, I would also like to inform our shareholders that in July 2009, DGI was the recipient of the first RMB cheque off-shore, kicking off the first free interbank remittance from Shenzhen to Hong Kong bypassing the foreign exchange requirement. This is a key milestone and one that will expedite our business flow between Hong Kong and China.
Looking ahead, while we are confident of our progress in China, we are still adopting a cautious approach to our business. According to the Semiconductor Industry Association, although 2009 turned out to be a better year for the global semiconductor industry than expected, it expects a return to the normal seasonal patterns, which suggests a modest slowdown in the first quarter of 2010.
At the ASTI Group, our consolidation and business rationalisation efforts will continue as we navigate the uncertainties that are still lurking across global economies. The importance of China’s recovery cannot be over emphasized because any hiccups may have global repercussions if they erode the country’s demand for imported capital goods and raw materials from the rest of the world.
In closing, on behalf of all my colleagues from ASTI, I thank all our shareholders for their trust and confidence as we rode through a very difficult year in 2009. The year ahead will still be fraught with uncertainties. With your support and encouragement, I am confident that we will be able to sustain our growth as we make further inroads into the market in China.
Yours sincerely,
Dato' Michael Loh
Executive Chairman
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