VTech Announces FY2007 Annual Results

Strong Performances from All Businesses Leads to Record Year

Jun 20, 2007, 01:00 ET from VTech Holdings Ltd

    HONG KONG, June 20 /Xinhua-PRNewswire-FirstCall/ --
     -- Record revenue and profit
     -- Group revenue increased by 21.5% to US$1,463.8 million
     -- Profit attributable to shareholders rose by 42.0% to US$182.9 million
     -- Net profit margin expanded 1.8% points to 12.5%
     -- Net cash, after special dividend of US$71.7 million, rose to
        US$246.5 million
     -- Final dividend of US41.0 cents per share, total dividend per share for
        the year (include special dividend of US30.0 cents) up 150.0%
     VTech Holdings Ltd (HKSE: 303; LSE: VTH; ADR: VTKHY) today announced
 its results for the year ended 31st March 2007, reporting record revenue
 and its second successive year of record profit.
     Revenue for the Group increased by 21.5% over the financial year 2006
 to US$1,463.8 million. Profit attributable to shareholders increased by
 42.0% to US$182.9 million. Earnings per share rose 39.5% to US76.6 cents.
 In light of the continued increase in profitability, together with the very
 strong Group balance sheet, the Board of Directors has proposed a final
 dividend of US41.0 cents per share. Together with the interim dividend of
 US9.0 cents and the special dividend of US30.0 cents made in celebration of
 the Group's 30th anniversary, this gives a total dividend for the year of
 US80.0 cents per share, 150.0% higher than the US32.0 cents declared in the
 financial year 2006.
     "All three of our businesses recorded revenue increases during the
 financial year 2007. The record results demonstrate that we are reaping the
 benefit of the hard work put in to enhance our operations and build a solid
 foundation for growth," said Mr. Allan Wong, Chairman and Group CEO of
 VTech Holdings Limited.
     Sales Rebound at TEL Business
     Revenue at the telecommunication products (TEL) business increased by
 11.1% over the financial year 2006 to US$660.6 million, accounting for
 45.1% of Group revenue.
     North America was the key growth driver. For the financial year 2007,
 revenue from the region increased by 26.3% to US$514.3 million,
 representing 77.9% of total TEL revenue, against 68.5% in the financial
 year 2006.
     The competitiveness of the TEL business in North America has
 strengthened following the rationalisation of its business operations two
 years ago. Better products, together with enhanced supply chain and channel
 management resulted in higher market share. The new 5.8GHz cordless phones,
 together with the AT&T 2.4GHz products using proprietary technology
 developed in-house, were well- received by consumers and enabled VTech to
 win more shelf space from retail customers.
     In Europe, as mentioned in the interim report, the market had suffered
 from excess inventory, especially during the first half of the financial
 year. Hence, despite a pick up of sales in the second half over the first
 half, revenue from this market still declined 25.1% over the financial year
 2006 to US$126.2 million, accounting for 19.1% of total TEL revenue.
     Across the Board Growth at ELP Business
     The ELP business achieved record revenue in the financial year 2007,
 which increased by 26.2% as compared with the financial year 2006 to
 US$570.1 million. This was equivalent to 39.0% of total Group revenue, as
 compared with 37.5% in the previous financial year.
     The growth came across the board, with good performances from all
 product ranges. The traditional ELPs recorded higher sales growth than the
 V.Smile range, mainly driven by increased shelf space and an expanded
 product portfolio.
     Revenue increases were apparent in all markets, with particularly
 strong growth in North America as VTech continued to gain shelf space in
 this market. Sales from the region rose by 29.2% to US$281.2 million. In
 Europe, revenue grew by 21.5% over the previous financial year to US$260.9
 million and VTech maintained its leadership position in its principal
     In the financial year 2007, the V.Smile range entered its third year of
 sales. Sales of the basic console and software met management expectations.
 In addition to the basic V.Smile, the range was extended through the
 introduction of the V.Smile Baby Infant Development System(TM) (V.Smile
 Baby), aimed at children from nine months to three years old and the
 V.Flash Home Edutainment System(TM) (V.Flash), which targets those aged six
 and up.
     Outperformance of CMS Business
     The CMS business once again achieved excellent results, with revenue
 for the financial year 2007 increasing by 47.3% over the financial year
 2006 to US$233.1 million, the third consecutive record. The business
 accounted for 15.9% of Group revenue, up from 13.1% in the previous
 financial year.
     The business once again outperformed the global Electronic
 Manufacturing Services (EMS) industry, which grew by some 13.5%* during the
 calendar year 2006. Although some new customers were acquired, the growth
 in revenue came primarily from existing customers, especially in the areas
 of switching mode power supplies, professional audio equipment and
 industrial printing. Particularly strong demand was experienced from
 customers in the United States and hence this market grew its share of
 total CMS revenue markedly from the 29.5% recorded in the previous
 financial year.
     Switching mode power supplies and professional audio equipment
 continued to be the leading product categories, accounting for 28.2% and
 27.7% of total CMS revenue respectively, followed by communications
 products and home appliances.
     Europe remained the leading source of revenue, representing 48.4% of
 total CMS revenue, followed by North America at 36.6% and Asia Pacific at
     Countering Cost Pressures
     All three businesses did well to counter cost pressures during the
 financial year 2007, despite high materials prices, rising labour cost and
 overheads in China, following the appreciation of the Renminbi. Greater
 economies of scale and efficiency gains mitigated these pressures. The new
 plant at Qingyuan, in the northern part of Guangdong province, is also
 beginning to make a positive impact.
     Changes in Directors
     The Group's Deputy Chairman, Mr. Albert Lee Wai Kuen, retired with
 effect from 1st April 2007. He has been with the Group since 1984 and will
 continue to play a role as an adviser to the Group. Two new Executive
 Directors were appointed in April 2007, Mr. Edwin Ying Lin Kwan, Group
 Chief Operating Officer and Mr. Pang King Fai, Group Chief Technology
     The rise in our production volumes has begun to put pressure on
 capacity and to ease capacity constraints and realise further economies of
 scale, the Group is adding manufacturing facilities. In the second quarter
 of the financial year 2008, a new factory building for the CMS business
 will open, increasing its capacity by some 50%. We also intend to build a
 second factory at Qingyuan, to serve the growing needs of the ELP business.
     *Source: Manufacturing Market Insider -- December 2006 issue
     Growth at the TEL business will primarily come from Europe as the
 market recovers from excess inventory. The North American business will be
 hard pressed to repeat the similar growth recorded in the financial year
 2007, since it has already rebounded from a sales decline and regained its
 leadership position. Nonetheless, innovative designs such as DECT 6.0
 models are creating new product categories for retail customers, while new
 technologies such as the infoPhone(TM) will enable VTech to explore new
 distribution channels. To add further avenues of growth, the TEL business
 intends to develop the small and home office market.
     Building on its strong position in Europe and increasing market share
 in North America, the ELP business is expected to continue to grow. The
 Whiz Kid Learning System(TM) will enable VTech to capture a position in the
 reading market. The V.Smile range will continue to evolve through an
 enhanced V.Smile console that will hit the shelves in August 2007, as well
 as a smaller and lighter version of V.Smile Pocket. The library of
 cartridges will expand further.
     Growth at the CMS business is expected to moderate as existing
 customers mature and newer customers only gradually build up orders, but it
 should again outperform the EMS market. The Japanese market will be a focus
 for new business development, with separate facilities, a dedicated team
 and a new sales office ready to serve the clients.
     "The succession of good results achieved in recent years testifies to
 VTech's ability to develop sound business strategies and execute them well.
 I believe we have developed a solid foundation for future expansion.
 Despite the uncertainties of the US economy, a probable further
 appreciation of the Renminbi, as well as continued rises in labour costs
 and components prices, we expect to achieve a similar level of
 profitability as in the financial year 2007," said Mr. Wong.
     About VTech
     VTech is 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, 20th June 2007 (HK time), the video archive
 of the FY2007 annual results announcement can be accessed through VTech's
 homepage www.vtech.com in the "Webcasting and Presentation" section under
 "Investor Relations".
     This release is issued by VTech Holdings Ltd through GolinHarris.
     For further information, please contact:
     Grace Pang
      VTech Holdings Ltd
      Office: +852-2680-1000
      Fax:    +852-2680-1788
      Email : grace_pang@vtech.com
     VTech representative in HK
      Nick Bradbury, GolinHarris
      Office: +852-2522-6475
      Fax:    +852-2810-4780
      Email : nick.bradbury@golinharris.com
      VTech representative in the US
      John Columbus, GolinHarris
      Office: +1-212-373-6037
      Fax:    +1-212-373-6001
      Email:  jcolumbus@golinharris.com

SOURCE VTech Holdings Ltd