Group revenue for the year ended
Basic earnings per share decreased by 34.6% to US58.5 cents, compared to US89.4 cents in the financial year 2008. A final dividend of US41.0 cents per ordinary share was proposed, as compared to US51.0 cents per ordinary share in the previous financial year.
"To respond to the sudden change in market conditions, VTech moved swiftly
to step up retail level promotions to stimulate sales. Although margins were
affected, it enabled VTech to end the full year with lower inventory than last
year. In addition, our balance sheet remains strong, with our net cash
position slightly ahead of the previous financial year. Our decisive and
aggressive action enabled us to establish a solid financial position from
which to move forward," said Mr.
Telecommunication Products (TEL) Business Strengthens Leadership Position
Revenue for the financial year 2009 at the TEL business declined 9.8% over
the previous financial year to
As in the financial year 2008, sales to
Despite the weak economic conditions, both the VTech and AT&T brands performed well and the Group continued to increase its market share, maintaining the number one position in the US cordless phone market. VTech DECT 6.0 models for warehouse clubs sold well, while the AT&T DECT 6.0 products with Bluetooth technology outperformed the competition, as their Bluetooth feature became highly regarded by consumers.
A new product category, AT&T cordless headsets, was introduced in October last year. These products have been well received by the market, although shipments have so far been on a modest scale.
Electronic Learning Products (ELP) Business Led by Standalone Products
The ELP business saw revenue decrease by 7.9% to
As consumers flocked to value in the weak economy, standalone products played a significant role. They accounted for 64.0% of total ELP revenue, against 57.0% in the financial year 2008. The infant category showed the strongest growth. Among pre-school products, the Kidizoom Camera(TM), launched in the previous financial year, continued to sell well.
Platform products, led by the V.Smile range, accounted for 36.0% of total ELP revenue, compared to 43.0% in the last financial year. Three new members, V-Motion(TM), Cyber Pocket(TM) and PC Pal(TM), were added to the V.Smile family. As the new flagship learning console, V-Motion met sales expectations in spite of a challenging year for new platform products. Overall, unit sales of both consoles and handhelds across the V.Smile range managed to hold their ground.
VTech's electronic learning products again garnered a good number of
awards. Among the award winners, V-Motion(TM) won the National Parenting
Center Seal of Approval and Family Fun magazine Toy of the Year 2008 award,
Contract Manufacturing Services (CMS) Sets Another Record
The CMS business achieved a fifth consecutive record in its revenue in the
financial year 2009 as sales rose by 5.0% to
The growth in sales was mainly driven by customers in the area of professional audio equipment, switching mode power supplies and solid-state lighting. VTech's high quality of service, acknowledged expertise in professional audio and word-of-mouth recommendation enabled it to secure additional orders. Professional audio remained the largest product category of the CMS business, accounting for 29.4% of total CMS revenue. This category was followed by switching mode power supplies at 25.4%, home appliances at 17.8% and communications products at 9.8%.
VTech continued to outperform the global Electronic Manufacturing Services (EMS) market in the financial year 2009. As with other EMS providers generally, VTech experienced a reduction in business from many existing customers in the second half as they scaled back orders across the board in the face of economic turmoil. However, the economic slump also brought more business from the existing customer base, as certain companies ceased to manufacture their own products, instead transferring their production to VTech in search of cost savings.
VTech also benefited from industry consolidation within the EMS market. Tight credit conditions have forced some smaller players to exit the market. VTech, with its strong balance sheet, economies of scale and tradition of socially responsible manufacturing has been able to gain market share overall as the industry consolidates.
An important factor in VTech's ability to attract business is the high
quality of service, which again resulted in a number of industry and supplier
awards. These include the Hong Kong Awards for Industries 2008 - Productivity
and Quality Award presented by the Hong Kong Productivity Council. This
recognises the achievement of the CMS business in continuously improving
productivity and quality. The business was also greatly encouraged by the
findings of the latest annual customer survey, conducted in
Looking ahead, consumer sentiment is expected to remain weak throughout most of the calendar year 2009. The International Monetary Fund estimates that global GDP will contract by 1.3% for the year, and the decline is likely to be even more severe in many of VTech's key markets.
Top line growth will therefore be very difficult to achieve in the financial year 2010, even though economies may recover and the Group anticipates increasing market shares for its TEL business. VTech is, however, cautiously optimistic that profitability will improve, as the Euro, Sterling and Renminbi show stability. It is also benefiting from the fall in raw material prices and labour costs, which will ease cost pressure.
To drive growth for the Group, VTech will continue to pursue its strategy based on product innovation, gains in market share, geographic expansion and operational excellence.
The TEL business is expected to perform well as industry consolidation
strengthens VTech's market lead even further. For the branded business, the
Group expects to see the full benefit of the exit of a major competitor in
In addition to gains in market share, the second half of the financial
year should also see contributions from two new product categories. The
enterprise phone for small and medium sized business in
The market for ELPs is likely to remain challenging, and consumers are expected to look for deals. In response, VTech will step up its efforts to deliver products that offer tremendous value. Across its product ranges, the Group will continue to support sales with aggressive retail level promotions. Margin pressure is expected to be partially offset by lower raw material costs, especially of plastics, and by VTech's proven ability to engineer for lower cost.
Product innovation will remain an important factor in driving sales for the ELP business. For standalone products, following the successes of the infant category in recent years, VTech is introducing "Jungle Gym". Combining electronic learning, fun and physical activities, Jungle Gym products continue the push outside the learning aisle, giving the ELP business new avenues for growth.
Platform products will be augmented with a new reading system, Bugsby. Offering pen-touch technology and ease-of-use at an affordable price, children will be able to read along with Bugsby and interact with their favourite characters in stories that build early reading skills.
Although the global EMS market is forecast to contract in the calendar
year 2009, the Group expects that its CMS business will continue to outperform
the global EMS market. VTech's position in the professional audio segment will
continue to increase following the establishment of a new state-of-the-art
audio laboratory at its R&D Centre in
"It has been a year of unprecedented volatility in both the financial and consumer markets. As a company with market leadership, excellent R&D, efficient operations and a strong balance sheet, VTech is very well placed not merely to ride out the global economic downturn, but to grow even stronger as global economy eventually recovers," said 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 22:00,
For further information, please contact: Grace Pang VTech Holdings Ltd Office: +852-2680-1000 Fax: +852-2680-1788 Email: firstname.lastname@example.org VTech representatives in Hong Kong Gloria Chiu, GolinHarris Office: +852-2501-7970 Fax: +852-2810-4780 Email: email@example.com VTech representative in the US Meredith Klein, GolinHarris Office: +1-212-373-6022 Fax: +1-212-373-6001 Email: firstname.lastname@example.org
SOURCE VTech Holdings Ltd