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Letter to Shareholders

Corporate Information

During the financial year under review, the Group reported revenue of $319 million which was comparable to that of FY 2014 of $330 million. The Group also managed to maintain its gross profit at 10.5% (FY 2014:10.7%) despite a challenging business environment.

Michael Mun
Group CEO & Chairman

Dear Fellow Shareholders,

Year In Review

FY 2015 saw the slowdon in the global economy caused by the continued decline in global crude oil prices over the year. This compounded volatility in the regional currencies against the US dollar and hike in interest rates created many challenges for businesses in general.

During the financial year under review, the Group reported revenue of $319 million which was comparable to that of FY 2014 of $330 million. The Group also managed to maintain its gross profit at 10.5% (FY 2014:10.7%) despite a challenging business environment.

With the slowdown in the overall global economy, especially in the oil & gas and marine sector, there was sizeable impact in the Group's performance in the form of asset impairment of vessels of $11.1 million. The Group also reviewed its inventory position and provided allowance of inventory obsolesence of $7.5 million. As a result, the Group reported a net loss of $18.5 million. Taking into consideration the overall market conditions, the Board of Directors was of the opinion that such actions were prudent and necessary.

The Group's financial position as at 31 December 2015 remained healthy with a positive net working capital position of $31.8 millioin (and total shareholder's equity of $63.2 million). As at 31 December 2015, the Group's current ratio and net debt to equity ratio (total borrowings net of cash on hand to shareholders' equity) were at healthy levels of 1.24 and 0.61 respectively.

Corporate Exercise

In 2015, the Company completed a ten-for-one share consolidation excercise in compliance with the minimum trading price requirement. The Company also carried out a capital redution exercise to write off the accumulated losses with a view of restructuring the finances of the Company and rationalising the balance sheet of the Company.

Challenges and Opportunities

Despite the challenges, the Group made some noteworthy achievement in the year. The Group's LED lighting business grew significantly with annual output of units increasing from 7 million units in FY 2014 to 22 million units in FY 2015. The infrastructure resources in the factory as well as manpower and quality systems were upgraded to handle the increase in this business activity of the Group. Going forward, the Group sees opportunity of growth in this sector.

The Group also saw increase in activity in its Home Products with the launch of new products together with increase in new outlets for its kay lee roast meat under its F&B segment.

FY 2015 was a low activity year for the Group's materials supply business as many of the projects were either delayed or not awarded, resulting in the underutilization of most vessels. In view of that, the Board of Directors is of the view that moving forward, it was best where possible to dispose the vessels and remain asset-lite. The Group is able to still continue carrying out its marine logistics business by chartering third party vessels as there is abundance of vessels in the market. Furthermore, by disposing the Group's vessels, the Group will be able have to bear the cost of maintaining these vessels during lull periods (cost such as berthing, fuel, crew, insurance, etc.).

The Group has in the last few years set up 3 clear and distinct segments- Electronics, Marine and Materials Supply & F&B-with each segment having its own infrastructure, resources and business model. The Group will continue to enhance and execute the respective segment's niche business to create long-term value to all our stakeholders.

Aztech marks its 30th anniversary this year. We have transformed ourselves from a company dealing with computers and computer peripherals in 1986 to a multi-business segment group of companies, almost like a mini conglomerate. The road over the years has not been easy but we have always been determined to overcome the challenges and march forward. With the 30th anniversary marking a special milestone for us, we are determined to reinforce our values and grow our business to get better in the years to come.

Acknowledgement

The Board of Directors, management and employees continue to give their commitment and dedication to overcome the various challenges posed by the global markets. Amid these challenges, the Group remains cautiously optimistic about the prospects of each business segment in the years ahead.

To my fellow directors, management, and staff, I would like to express my deepest appreciation for your efforts throughout the year. I would also like to extend my gratitude to our retired Directors, Independent Director Mr Colin Ng and Executive Director Mr Martin Chia for their service to the Board and the Group. To our valued customers, suppliers and business partners, I would like to say a word of thanks for your confidence and continuous support to the Group. Most of all, we would like to thank you, our Shareholders, for your relentless support. It is our mission to enhance shareholder's value in the years ahead.


Michael Mun
Group CEO & Chairman