Investor Relations

Dear Shareholders,

On behalf of the Board of Directors, I hereby present the Annual Report and Audited Financial Statements of ATS Group for the FPE 2017.

OVERVIEW

FPE 2017 continues to be challenging for the Group as overall market demand has been weak with global economy continues to experience headwinds while the Ringgit Malaysia depreciated to its lowest against US Dollar in recent five (5) years due to the volatile crude oil price and lower commodities prices. Domestically, business and consumer sentiments were affected by underperformance of the Ringgit Malaysia and the heightened volatility in financial markets.

Despite challenging global and domestic environment, the Malaysian economy grew, although at a slower pace of 4.2% in 2016 (2015: 5.0%). The economy recorded higher growth at 5.6% in the first quarter of 2017 (4Q 2016: 4.5%) mainly attributable to the continued expansion of domestic demand. Growth was further lifted by higher exports as increased demand for manufactured products led to a strong growth in net exports.

FINANCIAL HIGHLIGHTS

During FPE 2017, the Group registered a loss before tax of RM10.29 million on the back of revenue of RM18.24 million. This represents a higher loss of RM7.67 million from a loss before tax of RM2.62 million recorded in FYE 2016. Revenue has however increased slightly by 4.9% from a revenue of RM17.39 million recorded during FYE 2016. Loss before tax was higher mainly due to weaker performance in the fabrication and automation business, coupled with start-up manufacturing and operating costs incurred for production line of fabricating textile industry parts. The Group also incurred accounting expense on granting equity-settled share options to its employees amounting to RM3.6 million pursuant to the Group’s Share Issuance Scheme (”SIS”). If the expense arising from the grant of SIS options is excluded, the Group would have recorded a loss before tax of RM 6.69 million.

KEY CORPORATE DEVELOPMENTS

1. Completion of Capital Reorganisation and Rights Issue with Warrants

The Group has successfully completed the above and raised cash proceeds of RM25.98 million during FPE 2017. The said cash proceeds were mainly utilised for investment in the Group’s second Solar PV Plant with capacity of 300kW at its existing manufacturing plant in Plot 49, Bayan Lepas, Penang, investment in specialised machineries to setup production line for fabricating textile industry parts, repayment of bank borrowings and on-going working capital requirements.

2. Raised RM3.56 Million Through Private Placement

On 17 May 2017, the Group completed a private placement exercise and successfully raised proceeds of RM3.56 million. The Group intends to utilise the proceeds to acquire new specialised machineries for the purpose of setting up production line for fabrication of sheet metal. Con-currently, the Group will utilise part of the proceeds to finance the expansion of the production space of its existing manufacturing facility in Plot 82, Bayan Lepas, Penang to accommodate new machineries to be used in fabrication of sheet metal business. The fabrication of sheet metal will complement the Group’s existing fabrication capabilities, thereby allowing the Group to provide multiple solutions and present itself as a one-stop fabrication centre for its customers. The Group expects the new fabrication line to commence operations within 12 months from completion of the private placement.

OUTLOOK

Looking ahead, the Malaysian economy is projected to grow by 4.3% – 4.8% in 2017 (2016: 4.2%). The positive prospects are premised upon expectations of improving global economy and continued growth in domestic demand. The manufacturing sector is expected to record sustained expansion. The Electrical & Electronics exports is expected to be bolstered by a recovery in demand for semiconductors in 2017, particularly in new segments such as the automotive, industrial and storage markets, in addition to the steady demand for traditional devices such as smartphones. On this note, Malaysia stands to benefit from the better global growth prospects. Barring any unforeseen situation, the Board is optimistic that the Group will be able to improve its performance in the coming year.

WELCOMING OUR NEW NON-INDEPENDENT NON-EXECUTIVE DIRECTOR

On behalf of the Board, I would like to extend our warmest welcome to our new Non-Independent Non-Executive Director, Mr. Tan Sik Eek. Mr. Tan was appointed to our board on 1 February 2017 and he brings with him more than 15 years of experience ranging from corporate finance advisory to private equity investments. The Board and I look forward to work with Mr. Tan as we continue on our journey with the Group.

NOTE OF APPRECIATION

On behalf of the Board, I would like to extend our gratitude to our customers and business associates, for their continuous support to our business operations. I would also like to thank our valued shareholders, for their confidence in the Group.

Last but not least, I would like to thank our committed management team and staff, without whom, we would not be able to remain resilient to face this challenging environment. Let us continue to bring the business forward and continue to seek out new growth opportunities.

Yours sincerely,

Dato’ Nik Ismail bin Dato’ Nik Yusoff

Chairman