Vtech 2005 Annual Report Download

Download and view the complete annual report

Please find the complete 2005 Vtech annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 60

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60

  

C'$ 7#"C'$ 7#"

Table of contents

  • Page 1
    ,46230 +1/-. 7251 KddjYb U]fegi 988:

  • Page 2
    > >technology enjoy life Mission VTech's m ission is to be the m ost cost effective designer and m anufacturer of innovative, high qualit y consum er electronics products and to distribute them to m arkets w orldw ide in the m ost efficient m anner. cost effective com m unicate

  • Page 3
    ... for its popular V.Smile product range. Shares of VTech Holdings Limited are listed on both the Hong Kong and London stock exchanges (SEHK: 303; London SE: VTH). Ordinary shares are also available in the form of American Depository Receipts (ADRs) through the Bank of New York (ADR: VTKHY). Contents...

  • Page 4
    ...pleased to report that the full year results for the financial year 2005 w ere better than we expected w hen w e announced our half year results in Novem ber 2004. The Group's Electronic Allan WONG Chi Yun Learning Products (ELP) and Contract Manufacturing Services (CMS) businesses achieved better...

  • Page 5
    ... first VoIP 2.4GHz cordless phone w ith Skype. The Group is now developing an entirely new range of m ore cost effective products that m eet retailer expectations and consum er requirem ents, w hich w ill be introduced in early 2006. Management Changes mi6861 5.8GHz cordless phone VTech Holdings...

  • Page 6
    ... During the financial year 2005, the Group decided to establish its third m anufacturing plant in Qingyuan city in the northern part of Guangdong province. The new 49,000 square m etre facility w ill initially be used for supplying the plastics needs of our telecom m unication products business. The...

  • Page 7
    ... ent to allow the Group to capitalise on its core com petencies to achieve continued progress, and bring solid long-term returns to shareholders. Write & Learn ArtboardTM Allan WONG Chi Yun Chairm an Hong Kong, 22nd June 2005 VoIP 5.8GHz cordless phone VTech Holdings Ltd Annual Report 2005 05

  • Page 8
    ...a television for videogam ing on the big screen. But VTech is not just about V.Sm ile. The Group continues to introduce new electronic learning products in infant, pre-school and electronic learning aid categories. Write and Learn Series is one of the new product lines that launched in February 2005...

  • Page 9
    ...Final dividend of US12.0 cents per ordinary share, total dividend for the year up 30.0% Strong rebound in electronic learning products business Outperformance by contract manufacturing services business Unsatisfactory results of telecommunication products business in the United States more efficient...

  • Page 10
    ... exchange gain of US$5.0 m illion in the previous financial year. In the first half of the financial year 2005, the Group disposed of its Mexican factory and entities that w ere acquired in 2000, as part of Lucent's Wired Consum er Phones Business. The Group realised a gain of US$1.8 m illion from...

  • Page 11
    ... in sales at the telecom m unication products business for the sam e period. Employees As at 31st March 2005, the Group had approxim ately 22,700 em ployees, an increase of 15.2% from 19,700 in the previous financial year. Em ployee costs for the year ended 31st March 2005 w ere approxim ately...

  • Page 12
    Review of Operations Telecommunication Products > > A Year of VTech continued to make progress in developing the European markets, where revenue rose strongly by 102.2% over the financial year 2004 to US$112.8 million. 10 VTech Holdings Ltd Annual Report 2005

  • Page 13
    ... fixed-line telephone operators on an Original Design Manufacturing (ODM) Skype, the leading free Internet telephony service provider w orldw ide. We expect these products to start delivering a m eaningful contribution to the business in the financial year 2007. VTech Holdings Ltd Annual Report...

  • Page 14
    Review of Operations Electronic Learning Products > > A Year of The V.Smile TV Learning System is a dynamic video game platform for children aged 3-7. The response to V.Smile from both the trade and consumers has been overwhelmingly positive, making it a "star" in the ELP market worldwide. 12 ...

  • Page 15
    ... a console that plugs V.Smile won top industry awards in FY2005 United States • Best Overall Toy of the Year • Best Educational Toy of the Year Germany • Toy Innovations Aw ard 2005 - Learning Category United Kingdom • Electronic Learning Toy of the Year VTech Holdings Ltd Annual Report...

  • Page 16
    Review of Operations Alongside the stunning success of V.Sm ile, the traditional product lines recorded respectable grow th in revenue in both North Am erica and Europe. V.Smile Pocket, the handheld version of V.Smile 14 VTech Holdings Ltd Annual Report 2005

  • Page 17
    ... Titles Alphabet Park Care Bears The Lion King Winnie the Pooh Junior Thinkers - Ages 4 to 6 2004 Titles Little Red Riding Hood Scooby-Doo Spider-Man & Friends The Little Merm aid M aster M inds - Ages 6 to 7 or 8 2004 Titles Learnin' Wheels Mickey Mouse 2005 Titles Barney Bob the Builder Blue...

  • Page 18
    Review of Operations Contract Manufacturing Services > > A Year of Outperformance VTech's investment in offering a comprehensive R&D service to customers also began to show results, helping to drive the outperformance of the CMS business. 16 VTech Holdings Ltd Annual Report 2005

  • Page 19
    ...and Japan at 17.2%. CMS Revenue by Product Line Good Overheads Control Encouraging Results from R&D Investment VTech's investm ent in offering a com prehensive R&D service to custom ers also began to show results, helping to drive the outperform ance of the CMS business. In the financial year 2005...

  • Page 20
    ...Training As a global organisation w ith a w orldw ide m arket reach, m ultiple language skills are increasingly im portant to the workings of the Group and during the financial year w e arranged courses in both English and Employee Relations VTech benefits from the loyalt y and enthusiasm of its em...

  • Page 21
    ... as im proved access to education and lend support for individuals in genuine need. VTech staff joined the football tournament organised by KPMG Summer Internships in Hong Kong and the United States VTech has provided sum m er internships for students at universities and colleges of VTech donated...

  • Page 22
    ...called "Im plem entation of Restriction of Hazardous Substances directive in VTech" , w ith the target to convert all custom er products com pliant w ith the RoHS directive by the first quarter of the calendar year 2006. The business designed and launched a new product called "Aged Care Phone System...

  • Page 23
    ...V.Sm ile Pocket, a handheld educational video gam e system , w as unveiled at international toy fairs in Germ any and the United States. Contract Manufacturing Services The business designed and launched a bluetooth com m unication product for a Japanese custom er. Telecommunication Products VTech...

  • Page 24
    Corporate Governance VTech is committed to maintaining a strong system of corporate governance so that all business activities and decision-making can be properly regulated. The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange") has promulgated a new Code on Corporate Governance ...

  • Page 25
    .... The information systems in place are designed to ensure that the financial report is reliable. Model Codes for Securities Transactions The Company has adopted the Model Codes as set out in Appendix 10 of the Listing Rules and Appendix to Chapter 16 of the Listing Rules of the Financial Services...

  • Page 26
    .... Mr. TIEN is the Chairman and founder of the G2000 Group which starts its business back in 1979. Before starting up G2000, he worked with Macy's Department Store in New York, USA. Mr. TIEN is an active member in Hong Kong community affairs, holding posts like the Chairman of the Standing Committee...

  • Page 27
    ...sales and marketing. He holds a Bachelor degree in Electronics from Chinese University of Hong Kong and an MBA degree from Strathclyde Business School, UK. Gordon CHOW, aged 49, President of VTech Telecommunications Canada Limited, is responsible for the Telecommunication Products Business in Canada...

  • Page 28
    ... YUEN joined VTech in 1984. He holds a Bachelor degree in Electrical Engineering from Chinese University of Hong Kong. AU Ip Sing, aged 45, Senior Manager of Product Development Department (Engineering/Administration) of Electronic Learning Products Business. He has more than 10 years in Mechanical...

  • Page 29
    ... in electronic engineering development and project management, mainly on the wireless and telecommunication products area. Before joining CMS in 2002, Mr. POON had worked for VTech Telecommunications Limited for cordless phone development for seven years from 1994 to 2001. Rolf D. SEICHTER, aged 61...

  • Page 30
    ... in share capital, share options and warrants of the Company during the year are set out in note 19 to the financial statements. Reserves Movements in the reserves of the Group and the Company during the year are set out in note 20 to the financial statements. 28 VTech Holdings Ltd Annual Report...

  • Page 31
    ... the closing price of the shares of the Company immediately before the date on which the options were exercised was HK$11.10 per share. Note 4: The closing price of the shares immediately before the date on which the options were granted was HK$10.70 per share. VTech Holdings Ltd Annual Report 2005...

  • Page 32
    ...of the UK Listing Rules. Based on the information publicly available, the Company has maintained at least 25% of the total issued share capital of the Company to be held by the public at all times during the year ended 31st March 2005 and up to the date of this report. 30 VTech Holdings Ltd Annual...

  • Page 33
    ...a general mandate authorising the directors to effect repurchases of the Company's own shares up to a limit of 10% of the shares in issue as at that date. Purchase, Sale or Redemption of Listed Shares The Company has not redeemed any of its shares during the year. Neither the Company nor any of its...

  • Page 34
    ... consolidated financial statements of VTech Holdings Limited ("the Company") and its subsidiaries ("the Group") set out on pages 33 to 53 which have been prepared in accordance with International Financial Reporting Standards promulgated by the International Accounting Standards Board. Respective...

  • Page 35
    ... 0.1 Approved and authorised for issue by the Board of Directors on 22nd June 2005. 1.9 56.9 (18.1) 203.3 0.1 46.3 (11.3) 162.6 Allan WONG Chi Yun Director Albert LEE Wai Kuen Director The notes on pages 34 to 53 form part of these financial statements. VTech Holdings Ltd Annual Report 2005 33

  • Page 36
    ... these new IFRS and has so far concluded that the adoption of IFRS2 "Share-based payments" will have an impact on its consolidated financial statements as set out below: (i) At present, when the Group grants employees options to acquire shares of the Company at nil consideration, no employee benefit...

  • Page 37
    ... The consolidated financial statements include the financial statements of the Company and its subsidiaries together with the Group's share of the results and retained post acquisition reserves of its associates under the equity method of accounting drawn up for the year ended 31st March...

  • Page 38
    ... in which it is incurred. Amortisation is calculated to write off capitalised development costs on a straight-line basis over their estimated useful lives, commencing from the date when the products are put into commercial production. F Intangible Assets Intangible assets that are acquired by the...

  • Page 39
    ... for Sale (i) Stocks are stated at the lower of cost and net realisable value. Cost is calculated on the weighted average or the first-in-first-out basis, and comprises materials, direct labour and an appropriate share of production overheads. Net realisable value is the estimated selling price in...

  • Page 40
    ... forward over the average remaining service lives of employees. The net assets or liabilities resulting from the valuation of the plan are recognised in the Group's balance sheet. (iii) Equity and equity related compensation benefits The Company has a number of share option schemes which may grant...

  • Page 41
    ...engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. VTech Holdings Ltd Annual Report 2005 39

  • Page 42
    ... received and receivable for sale of goods and rendering of services to third parties. The principal activity of the Group is the design, manufacture and distribution of consumer electronics products. The telecommunication and electronic products business is the principal business segment of the...

  • Page 43
    ...the distribution of telecommunication and electronic products. Asia Pacific - the Group is headquartered in the Hong Kong Special Administrative Region and the Group's principal manufacturing operations are located in mainland China. The operating profit is arrived at after charging/(crediting) the...

  • Page 44
    ... bands: 2005 Individuals 2004 Individuals The emoluments of the directors of the Company are as follows: Fees Salaries, allowances and benefits in kind Bonuses Contribution to retirement benefit schemes Deemed profit on share option exercise Inducement for joining the Group Compensation for loss...

  • Page 45
    ... per share is based on 228.9 million (2004: 226.0 million) ordinary shares which is the weighted average number of ordinary shares in issue during the year after adjusting for the number of dilutive potential ordinary shares arising from the outstanding warrants and under the employee share option...

  • Page 46
    ...account movements for the years ended 31st March 2004 and 31st March 2005 are attributable to the following items: 31st March Credited /(charged) 1st April 2003 US$ million to income statement...(0.8 ) 3.1 (0.8 ) (1.0 ) (1.6 ) 2.1 (0.7 ) (0.2 ) (2.3 ) 1.9 44 VTech Holdings Ltd Annual Report 2005

  • Page 47
    ... 14.5 8.3 137.6 i) Associates Share of net tangible assets Other investments Unlisted investments, at cost 0.1 0.1 The majority of the Group's sales are on letter of credit and on open credit with varying terms of 30 to 90 days. Certain open credit sales are covered by credit insurance or bank...

  • Page 48
    ...using the projected unit credit method. 1.6 (1.2) 1.3 1.7 1.8 (1.5) 1.3 1.6 2005 2004 The principal actuarial assumptions used for accounting purposes were: Discount rate Expected return on plan assets Future salary increases 4.8% 7.0% 5.0% 5.0% 7.0% 5.0% 46 VTech Holdings Ltd Annual Report...

  • Page 49
    ... 2004, 100,000 ordinary shares were issued upon the exercise of 100,000 share options undertaken in March 2004 at the exercise price of HK$10.20 per share. The average closing price of the Company's shares traded on the Hong Kong Stock Exchange for the five business days immediately before the date...

  • Page 50
    ...the Listing Rules, the subscription price payable for each share under the 2001 Scheme shall be at least the highest of (i) the closing price of the shares as stated in the daily quotation sheets of the Hong Kong Stock Exchange on the date on which an offer is made, which must be a business day; and...

  • Page 51
    ...AT&T Corp. granted the Company the exclusive right to use the AT&T brand for 10 years in connection with the manufacture and sale of wireline telephones and accessories in the United States and Canada. Pursuant to a Revised AT&T Brand Licence Agreement dated 24th January 2002, the subscription price...

  • Page 52
    ... short-term deposits are placed with major financial institutions. Trade debtors are presented net of the allowance for doubtful debts. Credit risk with respect to trade debtors is limited due to the large number of customers comprising the Group's customer base and their dispersion across different...

  • Page 53
    ... of the facility for non-cancellable periods of six and eight years after completion respectively. The Group also had an option to purchase each phase of the production facility at any time within four and a half years after the completion of each phase. VTech Holdings Ltd Annual Report 2005 51

  • Page 54
    ... for the granting of certain rights to use the relevant cartoon characters into the Group's electronic learning products. Under these licensing agreements, the licensees are required to make royalty payments to the licensors, calculated as a percentage of net sales of the relevant character licensed...

  • Page 55
    ...100 Sale of electronic products Name of subsidiary Fully paid issued share capital Principal activity Incorporated and operating in the United Kingdom: VTech Electronics Europe plc GBP 500,000 *100 Sale of electronic products Incorporated and operating in Hong Kong: VTech Communications Limited...

  • Page 56
    VTech in the Last Five Years Consolidated statement of net assets as at 31st March 2001 US$ million 2002 US$ million 2003 US$ million 2004 US$ million 2005 US$ million Note Non-current assets Tangible assets Leasehold land payments Other non-current assets (i) (ii) 95.9 7.0 4.5 107.4 58.0 3.1 ...

  • Page 57
    ... Principal Office 23rd Floor, Tai Ping Industrial Centre Block 1, 57 Ting Kok Road Tai Po New Territories Board of Management Allan WONG Chi Yun Albert LEE Wai Kuen Andy LEUNG Hon Kwong Kent WONG Wah Shun Hong Kong Principal Bankers The Hongkong and Shanghai Banking Corporation Limited Hang...

  • Page 58
    Information for Shareholders Listings Shares of VTech Holdings Limited are listed on both The Stock Exchange of Hong Kong Limited and London Stock Exchange Plc. Ordinary shares are also available in the form of American Depository Receipts through the Bank of New York. UK Branch Stock Codes The ...

  • Page 59
    ...com VTech Electronics Europe plc Napier Court Abingdon Science Park Abingdon, Oxon, OX14 3YT Tel: (44) 1235 555545 Fax: (44) 1235 546804 website: http://www.vtechuk.com email: [email protected] United States VTech Electronics North America, L.L.C. 1155 West Dundee, Suite 130 Arlington Heights IL...

  • Page 60
    WV][_ Oeb\`d^h Ri\ VY` T`d^ Pd\jhig`Yb M]dig]> Lbe[a B EG V`d^ Qea UeY\> VY` Te> S]l V]gg`ieg`]h> Oed^ Qed^ V]bI