Vtech 2005 Annual Report Download - page 10
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Please find page 10 of the 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.Management Discussion and Analysis
VTech Holdings Ltd Annual Report 2005
08
Gross Profit/Margin
The gross profit for the financial year 2005 was US$328.8 million, an
increase of US$47.5 million compared to the US$281.3 million
gross profit recorded in the previous financial year. Gross margin
for the year im proved from 30.7% to 32.2%. The increase in gross
margin was due to the change in sales mix, the success of the
V. Sm ile TV Learning System and management effort in
controlling overheads.
Operating Profit
The operating profit for the year ended 31st March 2005 was
US$62.7 million, an increase of US$13.2 million over the previous
financial year. Current year's operating profit included non-
recurring income arising from settlement of an indemnification
claim amounted to US$6.7 million. Excluding such income, the
operating profit increased by US$6.5 million, or 13.1%. This
improvement mainly came from improved gross profit and
gross margin.
Selling and distribution costs increased by 21.2% from US$150.7
million in the previous financial year to US$182.6 million in the
financial year 2005, ow ing to increased spending on advertising
and prom otional activities to foster sales of new products, as well
as an increase in royalty payments to licensors for the use of
popular cartoon characters for certain ELPs and V. Smile
Smartridges. Distribution costs also increased in response to the
increased volume of products sold. Adm inistrative and other
operating expenses increased from US$47.9 million in the previous
financial year to US$51.7 million in the financial year 2005,
representing an increase of 7.9%. These expenses included
additional expenditure related to the implementation of a new
global enterprise resources planning system to enhance supply
chain and management processes. Nevertheless, the amount of
administrative and other operating expenses as percentage of
Group revenue slightly decreased from 5.2% in the previous
financial year to 5.1% in the financial year 2005.
During the financial year 2005, the appreciation of the Euro,
Sterling, Canadian dollar and other currencies against the US dollar
gave rise to a net exchange gain of US$3.3 million, compared to a
net exchange gain of US$5.0 million 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 Consumer Phones Business. The Group realised a
gain of US$1.8 million from these transactions.
Research and development activities are vital for the long-term
developm ent of the Group. During the financial year 2005, the
Group spent US$38.5 million on research and development
activities, which represented around 3.8% of total Group revenue.
Basic earnings per share for the year ended 31st March 2005 was
US25.2 cents as compared to US20.5 cents in the previous financial
year. During the year, the Group declared and paid an interim
dividend of US1.0 cent per share, which aggregated to US$2.3
million. The Board of Directors has proposed a final dividend of
US12.0 cents per share, which will aggregate to US$27.3 million.
Total dividend for the year amounts to US13.0 cents per share,
representing an increase of US3.0 cents per share or 30.0% from
the previous year.
Liquidity and Financial Resources
The shareholders' funds as at 31st March 2005 were US$203.3
million, a 25.0% increase from US$162.6 million reported for the
financial year 2004. The net assets per share increased by 25.0%
from US72.1 cents to US90.1 cents.
As at 31st March 2005, the net cash increased to US$123.7 million,
up 20.6% from US$102.6 million at the previous year-end. The
Group is substantively debt-free, except for certain interest bearing
liabilities amounting to US$0.2 million, of which US$0.1 million is
Net Profit and Dividends
The profit attributable to shareholders for the year ended
31st March 2005 was US$56.9 million, an increase of US$10.6
million as compared to the previous financial year. There were non-
recurring receipts of US$6.7 million arising from settlement of an
indemnification claim during the financial year 2005. The ratio of
EBIT and EBITDA to revenue was 6.1% and 7.9% respectively.