EURO Holdings Berhad ("EURO") experienced a year of revitalization from a lowering profit before tax in 2006 to a leap of more than 50% to RM10.8 million in 2007. Despite facing the threats of a global economy slowdown, the Malaysian economy has been quite resilient. In fact, GDP growth accelerated to 6.3% as compared to 5.9% in 2006. So far, Malaysia has only felt a minor impact from the slowing US economy, mainly through slower export growth.

GROUP PERFORMANCE REVIEW

The Group recorded a growth in revenue from RM94.5 million in 2006 to RM120.2 million in 2007, a remarkable growth rate indeed. Despite the economic uncertainties in the global market, the Group's sales performance in both domestic and overseas markets had improved significantly.

Domestic sales chalked up a growth figure of 33.6% from RM33.6 million achieved in 2006. This was attributed to improved local market conditions, with higher number of ongoing projects. The Group secured and completed more projects throughout the year. We are glad to have gained the trust of prominent leaders in their respective industries. This can be attested by our list of clientele which includes Telekom Malaysia Berhad, Bank Pembangunan Malaysia Berhad, CIMB Group, Siemens Malaysia Sdn Bhd and Shell Malaysia Trading Sdn Bhd, etc.

The Group's exports continued to grow at a strong rate of 23.6%, contributing 62.6% to the Group's revenue. India continued to be the most significant overseas market to EURO due to many IT hubs and MNCs relocations and expansions in that nation. The growth rate in India remained positive and is expected to continue despite the uncertainties in the global economy. Our Original Development Manufacturing ("ODM") contract with Godrej & Boyce Mfg Ltd Co, India signed on 21st June 2006 had seen some positive results. It contributed in excess of the expected target to the Group's revenue in 2007 and is expected to outperform the contractual value per annum for the remaining period of the contract. Owing to this encouraging success, the Group continued to pursue ODM or OEM opportunities overseas and on 18th September 2007, the Group signed a distribution agreement with Rosemount Office Systems, LLC, a manufacturing company in the United States.

Similarly, the Group had performed remarkably well in the Middle East market. It contributed more than 10% of the Group's export revenue from a mere 4% in 2006. In order to secure growth in this highly potential market, the Group is working closely with local partners in these countries to further penetrate and explore the market.

PRODUCT LAUNCHES

PLANT & MACHINERY

Phase I of the third plant in Rawang was completed in December 2006 and was fully operational by April 2007. The plant had provided for an additional 110,000 sq ft of production/warehousing capacity to cater for the Group's operation.

To cater for the increased market demand, further plant expansion programmes are in the pipe-line. Construction of phase II of the third plant is set to commence in the third quarter of 2008 to house the new product line - storage accessories. Upon completion, it will provide an additional warehousing capacity and a new showroom for the Group. This will add a further estimated total space area of 120,000 sq. feet. Completion is expected to be in the third quarter of 2009 and fully operational by the fourth quarter of the same year.

For long-term benefits, the Group will continue to invest heavily in machinery and modern plant facilities to increase automation. This is an effective measure to reduce dependence on manual labour, expedite production, improve product quality and achieve overall quality consistency.

FUTURE OUTLOOK AND PLANS

The global economy, especially the softening of the US economy may directly or indirectly impact the rest of the world economies. The Ringgit is expected to appreciate further against the US Dollar in tandem with other foreign currencies. The continued appreciation of Ringgit will remain the biggest challenge to the Group as more than half of the Group's revenue is from export sales. The continued appreciation of Ringgit will dampen the Group's margin. Besides, rising raw material costs in view of the escalating crude and commodity prices especially for steel, aluminium and plastic, is certainly another challenge faced by the Group.

In countering the rising raw material prices and declining export price as a result of the appreciation of Ringgit against US Dollar, the Group will enhance cost efficiency and increase productivity via process improvements and automation. When necessary, the Group will practice higher stocking of raw materials to preserve raw material consistency at lower price. The Group will monitor the product selling price closely and review the selling price when necessary.

We seek to further penetrate the South East Asian markets especially Indonesia, Philippines, Vietnam and Cambodia. Greater efforts will also be put in to develop the highly potential markets in the Middle East as many major infrastructure and construction works had been completed and thus, interior furnishings are required.

The Group shall continue to seek contract our manufacturing activities, whether OEM or ODM, to broaden revenue stream while emphasis will still be on developing our own in-house brand. Whilst EURO's growth will still be driven by Original Brand Manufacturing sales, the Group will continue to look out for further contract-manufacturing opportunities for large international brands overseas for consistent revenue stream and to boost overall revenue.

As a long-term vision, the Group shall continuously create brand awareness of EURO as a brand synonymous with innovation and quality. An active advertising and promotion plan shall be meticulously planned out. Finally, for continued growth, the Group will pursue opportunities to diversify the Group's business via new investments.

LEW FATT SIN
Group Managing Director