HONG KONG, July 3 /Xinhua-PRNewswire-FirstCall/ --
-- Record revenue and profit
-- Group revenue increased by 6.0% to US$1,552.0 million
-- Profit attributable to shareholders rose by 17.9% to US$215.7
-- Net profit margin expanded 1.4% points to 13.9%
-- Net cash topped US$285.4 million
-- Final dividend of US51.0 cents per share, total dividend per share
for the year (exclude a special dividend of US30.0 cents per share
in the financial year 2007) up 26.0%
VTech Holdings Ltd (HKEx: 303; LSE: VTH; ADR: VTKHY) today announced
its annual results for the year ended 31st March 2008, reporting record
revenue and profit, as net profit margin again expanded.
Revenue for the Group increased by 6.0% over the financial year 2007 to
US$1,552.0 million. Profit attributable to shareholders rose 17.9% to
US$215.7 million. Earnings per share rose 16.7% to US89.4 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 US51.0 cents per share. Together with the interim dividend of US12.0
cents per share, this gives a total dividend for the year of US63.0 cents
per share. Excluding a special dividend of US30.0 cents per share in the
financial year 2007, the total dividend per share for the financial year
2008 increases 26.0% over the previous financial year.
"Despite challenging economic conditions, VTech reported record revenue
and profit and we were able to expand net profit margin for a third
consecutive year. The solid result reflects the success of our strategy,
with its focus on the four key areas of product innovation, gains in market
share, geographic expansion and operational excellence," said Mr. Allan
Wong, Chairman and Group CEO of VTech Holdings Limited.
Margin Improves Further
While rising costs posed a challenge to all manufacturers during the
financial year 2008, VTech continued to build on its track record of
achieving margin improvement, based on its know-how in R&D and
manufacturing. The Group leveraged its economies of scale, re-engineered
products and increased productivity through better utilisation of
manufacturing capacity. At the same time, stringent quality control ensured
that products met customer expectations, helping to raise sales.
Telecommunication Products (TEL) Business Strengthens Position
Revenue at the TEL business rose 4.1% over the previous financial year
to US$688.0 million and the business accounted for 44.3% of Group revenue.
In contrast to the financial year 2007, growth was mainly driven by
increased sales to Europe, Asia Pacific and emerging markets, where VTech
mainly operates an Original Design Manufacturing (ODM) business.
Sales to Europe grew by 42.9% to US$180.3 million, mainly buoyed by
increasing sales to existing customers as the business delivered more price
competitive products through its new technology platform. Sales to the Asia
Pacific and emerging markets also rose by 126.1% and 32.3% respectively,
with notable sales growth from Australia, Brazil and India.
Adding to the ODM business, in December 2007, the Group entered into a
joint venture with Funkwerk Enterprise Communications GmbH (FEC), a leading
supplier of network and communications solutions based in Germany. FEC will
provide expertise and software for the development of integrated access
devices, with VTech responsible for hardware design and manufacturing. The
first shipment is expected in the final quarter of the financial year 2009.
Sales to North America, where VTech operates a branded business using
the VTech and AT&T brands, declined by 7.3% to US$476.8 million. Although
sales to Canada increased markedly, this could not offset the decline in
the United States where customers reduced inventory in anticipation of an
economic slowdown. VTech nonetheless continued to outperform the
competition in the United States and gain market share.
Strengthening its leadership position, on the technology side, VTech
added to its track record of industry "firsts" by introducing a cordless
phone with instant messaging capability. The new AT&T DECT 6.0 series,
meanwhile, brought to the market phones that deliver the best range and
voice clarity using a proprietary antenna technology.
In cutting edge design, the popular V.Mix range allows users to
customise handsets with their own graphics. The new V.Style series also
created a new trend and standard of high-end industrial design cordless
telephones in stores.
Traditional Electronic Learning Products (ELP) Boost Sales
The ELP business achieved a record performance for the third
consecutive year, with revenue increasing by 8.0% to US$615.7 million,
equivalent to 39.7% of total Group revenue, as innovative products
supported by increased shelf space boosted growth. In Europe, revenue
increased by 13.5% to US$296.1 million, as VTech maintained its
long-established leadership in its principal markets. Sales in North
America also posted gains, rising 3.5% to US$291.1 million. Traditional
ELPs led the way, with good sales across the board, although sales of the
award-winning Whiz Kid PC Learning System(TM) were not up to expectation.
The maturing of the basic V.Smile platform led to an easing off in
sales of both consoles and cartridges. Consequently, contribution of the
V.Smile range to total ELP sales declined to 40.7%, compared to 51.0% in
the previous financial year. Nonetheless, the V.Smile console and
cartridges continued to be the top selling platform items in the electronic
preschool category in the United Kingdom, France and Germany in the
calendar year 2007.
To augment the basic console, three new members of the V.Smile family
have been launched in the calendar year 2008. The new V-Motion(TM) console
combines educational video gaming with a wireless motion-activated
controller. Together with the associated game titles, it creates an
interactive gaming experience that engages both minds and bodies. The new
Cyber Pocket(TM) joins the existing V.Smile Pocket(TM) in the Group's
offering of handheld educational gaming systems. To complete the line-up,
PC Pal(TM) is an interactive TV educational game console equipped with a
wireless keyboard, a mouse and a writing pad, teaching young children basic
computer skills such as typing and mouse manipulation.
Both V-Motion and Cyber Pocket include V.Link(TM), a USB drive that
connects children to VTech's secure online site to unlock bonus games and
track their learning progress. These new V.Smile products are also
compatible with the entire existing V.Smile Smartridge library, which, in
the calendar year 2008 will be joined by eight new titles.
In addition to the strengthened V.Smile family, major product launches
in the calendar year 2008 also include the KidiCreative(TM) line and
Create-A- Story (TM). KidiCreative is a line of products that offer high
tech creative play for children. It includes the award-winning Kidizoom
Camera(TM), KidiArt Studio(TM), KidiJamz Studio(TM) music keyboard and
KidiDoodle(TM) game pad. Create-A-Story is a TV connected interactive
reading system that lets children create their own animated stories
involving their favourite Disney characters.
Record Performance at Contract Manufacturing Services (CMS)
The CMS business achieved a fourth consecutive record, with revenue for
the financial year 2008 increasing by 6.5% to US$248.3 million, accounting
for 16.0% of Group revenue. The growth was driven by new customers in
professional audio equipment and radio frequency products.
VTech continued to build its reputation in the Electronic Manufacturing
Services industry and is increasingly winning business through
word-of-mouth recommendation. This is especially true for professional
audio equipment, which accordingly became the largest product category,
accounting for 26.8% of total CMS revenue, followed by switching mode power
supplies at 25.4%, home appliances at 13.0% and wireless products at 13.0%.
While North America raised its share of total CMS revenue to 40.4%,
Europe remained the largest market at 45.7%, followed by Asia Pacific at
13.9%. Good progress was made in developing Japanese customers, who have
been impressed by the new dedicated facility.
The quality of the service VTech offers was again evidenced by a number
of supplier awards. Despite continued cost pressures, the CMS business has
been able to mitigate the impact of cost increases through economies of
scale and leveraging the procurement power of the Group. The business was
also able to pass on some cost increases to customers.
"It is prudent not to foresee growth for the financial year 2009, as
economic conditions in our markets, especially the United States, are
worsening. In addition, cost pressures will continue owing to the high oil
price, rising labour costs and inflation in mainland China. Nevertheless,
we remain positive about our future. Our track record in product
innovation, dominant position in many markets, strong balance sheet and
operational excellence should allow us to strengthen our competitive
position. We will continue to manage costs closely and focus on our four
strategic drivers for expansion," said Mr. Wong.
In the TEL business, the ODM business is expected to grow, as
competition weakens and VTech continues to develop emerging markets. The
joint venture with FEC will start to contribute to sales in the final
quarter of the financial year.
Although the branded business will be affected by the slowing US
economy, new product categories that will bring incremental sales are to be
launched. These include AT&T office headsets and a new range of enterprise
phones for medium sized businesses.
For the ELP business, market conditions will be challenging. Not only
is the US economy slowing, but competition is increasing, while the benefit
the Group has reaped from an appreciating Euro is unlikely to continue.
Nonetheless, the global toy business has historically performed
relatively well during economic downturns. We also have a sound strategy
that should allow us to grow the business. Continued innovation in products
remains at the core of this strategy and this will help rejuvenate the
V.Smile range. V- Motion, an interactive educational gaming system that
engages both minds and bodies, is already on the shelves. It will be joined
by Cyber Pocket, a new handheld version to complement the V.Smile Pocket.
Both of these products feature USB connectivity, offering more value to
Following the success of V.Smile, which brought a new dimension to the
ELP business, the Group is working to create other new categories that can
become major growth drivers. One of the new product lines to be launched
during the financial year 2009 is the KidiCreative line, which offers high
tech creative play for children.
The prospects for the CMS business looks promising and further sales
increases from both existing and new customers are anticipated. The
business will continue to focus on medium sized customers and maintain our
edge in quality and cost. In mid 2007, the CMS business set up a six sigma
team to improve operational efficiency and this is beginning to yield
results. Work processes are being streamlined and automation increased in
order to reduce the dependence on labour, raise productivity and improve
product quality. The business is also consolidating the supplier base and
strengthening relationships with fewer suppliers to ensure it achieves the
most favourable pricing.
"We should not underestimate the challenges that lie ahead, but with
leadership in our markets, a strong balance sheet and a highly efficient
manufacturing capability, VTech should benefit in the longer term from the
industry consolidation that will ensue," concluded Mr. Wong.
VTech is one of the world's largest suppliers of corded and cordless
telephones and 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, 3rd July 2008 (HK time), the video archive
of the FY2008 annual 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:
VTech Holdings Ltd
VTech representatives in Hong Kong
Gloria Chiu, GolinHarris
VTech representative in the US
Meredith Klein, GolinHarris
SOURCE VTech Holdings Ltd