HONG KONG, Nov. 23 /Xinhua-PRNewswire-FirstCall/ -- VTech Holdings Ltd
(SEHK: 303; London SE: VTH; ADR: VTKHY) today announced its interim results
for the six months ended 30th September 2005, showing a strong increase in
profit. Group revenue increased by 22.9% over the same period of the
financial year 2005 to US$561.7 million. Profit attributable to shareholders
surged by approximately 4.5 times or 444.7% to US$46.3 million. Earnings per
share increased by more than four times or 428.9% to US20.1 cents, compared to
US3.8 cents in the corresponding period last year. An increased interim
dividend of US6.0 cents per ordinary share has been declared, against US1.0
cent per ordinary share in the first half of the financial year 2005.
''VTech continued to demonstrate significant improvement in operations
with strong growth in profit and a double-digit percentage increase in revenue
in the first half of the financial year 2006,'' said Mr. Allan Wong, Chairman
and Group CEO of VTech Holdings Ltd. ''The performance reflects management's
success in restoring profitability at the telecommunication products business,
continuing momentum at the electronic learning products (ELP) business,
particularly in our V.Smile product range, and further growth at the contract
manufacturing services (CMS) business.''
Profit Recovery at Telecommunication Products Business
The telecommunication products business achieved a marked progress in the
first half of the financial year 2006. The business returned to profitability
despite a 2.3% decline in revenue to US$297.0 million. The recovery in profit
on the back of lower revenue reflects management's success in reducing the
cost structure of the business.
The decrease in revenue was mainly attributable to the planned reduction
in sales to the North American market, as management streamlined the product
lines and exited low margin business arrangements. As a result, revenue from
the region dropped by 16.5% to US$209.8 million.
Although the North American sales were reduced, the cost structure was
greatly improved through a comprehensive re-engineering programme. A portion
of the cost savings has been invested in strengthening product design. More
effort has been put into understanding user demands and retailer expectations,
to ensure that new products will be more in line with market demand.
In Europe, the business benefited from the increasingly open market.
Revenue grew by 95.8% over the first six months of the financial year 2005 to
US$78.7 million. The growth was driven by increasing orders from existing
customers, mainly the leading fixed-line telephone operators, and orders from
Strong Performance at ELP Business
The ELP business had an excellent six months, led by strong sales of the
V.Smile product range. Revenue was more than doubled or up by 104.0% over the
same period last year to US$194.0 million. This reflects a full six months'
contribution from the V.Smile product range. Profitability of the business
also rose substantially as a result of this factor.
The V.Smile product range, including the V.Smile TV Learning System, its
portable version V.Smile Pocket, cartridges and accessories contributed
approximately 50% of the total ELP revenue in the first half of the financial
year 2006. The ratio of cartridges to consoles also increased as compared to
the same period last year. The performance demonstrates the competitive
advantages of V.Smile as a first mover in the market, with a more varied
portfolio of cartridges, superior features and economies of scale that allow
V.Smile Pocket has added a new avenue of growth to the V.Smile range and
sales have met management expectations. The product was included in the Toys
''R'' Us ''Joy List'' and the ''Hot Dozen'' list from Toy Wishes Magazine,
representing top choices for children in the upcoming holiday season in the
During the period, VTech's traditional ELPs also sold well and recorded a
double-digit percentage growth in revenue. Among them is the Write & Learn
Series, which uses proprietary writing recognition technology to encourage
young children to acquire basic writing skills.
Geographically, revenue from North America showed a robust increase of
almost two times or 197.1% over the same period last year to US$92.7 million,
as the business continued to regain lost shelf space. Further growth was
recorded in Europe, where revenue grew by 57.9% to US$88.6 million as VTech
maintained its leadership position in all major categories. The business also
achieved positive developments in other markets such as Latin America and
Solid Growth at CMS
Revenue at the CMS business increased by 21.9% over the first six months
of last year to US$70.7 million, once again outperforming the global
Electronic Manufacturing Services (EMS) industry and making a steady
contribution to Group profit.
The rise in revenue came across the board, largely from existing customers.
It reflects VTech's ability to provide a high quality and cost-effective
''one-stop shop" service to small and medium sized enterprises (SMEs).
Professional audio equipment and switching mode power supplies continued to be
the major product categories, followed by home appliances and wireless
products. Particularly strong growth of 58.8% was recorded in the Asia
Pacific region driven by increasing orders from Japan in the areas of home
appliances and medical equipment, while Europe remained the largest market for
New Manufacturing Facilities in Qingyuan
The Group's new manufacturing facilities in Qingyuan city, in the northern
part of Guangdong province in China, will begin operations in November 2005.
This 49,000 square metre facility gives VTech access to a less expensive
supply of labour and electricity. It will allow the Group gradually to bring
the plastics production for the telecommunication products in house, and to
achieve savings in the long run.
Cautiously Optimistic Outlook
VTech cautioned that any downturn in consumer sentiment in the United
States could adversely affect the outlook for the second half, noting that
retailers in the US market are now more cautious in their approach to
In addition, the Group will need to continue to control costs in light of
high energy prices, rising labour costs and the impact of RoHS, the European
environmental directive that will become mandatory in July 2006. A further
upward revaluation of the Renminbi would also increase operating costs.
Nonetheless, VTech is well positioned. The rationalised cost structure of
the telecommunication products business is supporting profitability. The
business will benefit from the consolidation of the US cordless phone market
as retailers seek to reduce the number of suppliers. The Group expects to
expand further in Europe as the market opens further. The revamped product
lines for the US market, however, will not be introduced until the early 2006
and hence will only have a modest impact on revenue during the current
For the ELP business, point of sale data thus far suggest continued growth
in Europe and the United States. The V.Smile product range is also expected
to build on its first mover advantages. We expect that the revenue split
between the first and the second half of the current financial year will
return to a more even pattern.
The CMS business is forecast to maintain healthy growth as the global EMS
market expands, and will strive to achieve continued improvement in internal
operations to offset cost pressures.
''VTech is moving forward to accomplish its mission of being the most
cost-effective designer and manufacturer of innovative and high quality
consumer electronics products,'' said Mr. Wong. ''We look forward to a solid
second half and further progress in the years ahead.''
VTech is the one of the world's largest suppliers of corded and cordless
telephones and a leading supplier of electronic learning products. It also
provides highly sought-after contract manufacturing services. Founded in 1976,
the Group's mission is to be the most cost effective designer and manufacturer
of innovative, high quality consumer electronics products and to distribute
them to markets worldwide in the most efficient manner.
Note: Starting from 21:30, 23rd November 2005 (HK time), the video archive
of the 2005/06 interim results announcement can be accessed through VTech's
homepage http://www.vtech.com in the ''Webcasting and Presentation'' section
under ''Investor Relations''.
For further information, please contact:
Grace Pang VTech representative in HK
VTech Holdings Ltd Nick Bradbury, GolinHarris
Tel: +852-2680-1000 Tel: +852-2522-6475
Fax: +852-2680-1788 Fax: +852-2810-4780
Email: firstname.lastname@example.org Email: email@example.com
VTech representative in the US
Cassandra Hegarty, GolinHarris International
SOURCE VTech Holdings Ltd