SOLUTION ENGINEERING HOLDINGS BERHAD (“Solution” or the “Company”)

RESEARCH REPORT

1.FINANCIAL HIGHLIGHTS

The unaudited consolidated results for the second (2nd) quarter and 6 months financial period ended 30 June 2006 of Solution and its subsidiary (“Solution Group” or “Group”) are set out below:

Individual Quarter / Cumulative Quarter
Current Year Quarter
30 June 06 / Preceding Year Corresponding Quarter
30 June 05 / % change / Current Year to Date
30 June 06 / Preceding Year Corresponding Period
30 June 05 / % change
RM’000 / RM’000 / RM’000 / RM’000
Revenue / 5,609 / 2,964 / 89.2 / 7,683 / 4,012 / 91.5
Profit before tax / 909 / 628 / 44.7 / 1,433 / 808 / 77.4
Profit for the period / 895 / 608 / 47.2 / 1,400 / 788 / 77.7

The Company and it’s subsidiary company (“Group”) generated an unaudited revenue of RM5.609 million and with unaudited profit before tax of RM909,000 for the second quarter ended 30 June 2006. Revenue for the current quarter represents 89.2% higher from corresponding quarter in the preceding year. Profit before taxation for the current quarter increased by 44.7% from RM628,000 in preceding year corresponding quarter to RM909,000. The substantial increase in revenue and profit before tax was largely contributed from billing of several substantial contracts from local and foreign universities.

For the current quarter under review, revenue increased more than two-fold to RM5.609 million from RM2.074 million in the immediate preceding quarter. The Group's profit before taxation for the quarter under review marked an improvement of 73% in tandem with higher revenue achieved as compared to immediate preceding quarter.

  1. DIVIDENDS

No dividend was proposed or declared in respect of the current financial period ended 30 June 2006.

3.Utilisation of Proceeds

As at 30 June 2006, the company has utilized approximately 59.3% of the total IPO proceeds.

The proceeds from the IPO have been utilized as follows:

Total Amount of IPO Proceeds
(RM) / Total Utilisation of IPO Proceeds as at 30 June 2006
(RM) / Balance of IPO Proceeds as at 30 June 2006
(RM)
Settlement of bank borrowings on the purchase of premises / 600,000 / 600,000 / -
Demonstration and Training Centre / 500,000 / 212,756 / 287,244
Research & Development Expenditure / 2,100,000 / 474,839 / 1,625,161
Working Capital - Local / 2,500,000 / 1,900,626 / 599,374
Working Capital - Overseas / 1,500,000 / 551,737 / 948,263
Listing Expenses / 1,300,000 / 1,300,000* / -
Total : / 8,500,000 / 5,039,958 / 3,460,042

* Unutilised listing expenses of RM253,532 have been transferred to working capital.

4.FUTURE PROSPECTS

In the first half of the year, public and private universities continued to be the Group’s highest revenue contributors and core customers. These sectors continued to have strong demand for the Group’s products and services as the Government continued to emphasize on human capital development.

Notwithstanding the Company’s focus on its core business, the management aims to expand its business by identifying potential companies for possible acquisition in related business areas to create synergistic value to the Group.

Based on Group’s current performance, barring any unforeseen circumstances, the Board of Directors anticipate that the revenue for financial year ending 31 December 2006 of the Group will be higher than that of the immediate preceding financial year.

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