Vtech 2005 Annual Report Download - page 11

Management Discussion and Analysis
VTech Holdings Ltd Annual Report 2005 09
repayable within one year and US$0.1 million is repayable within
five years. The Group's borrowings are denom inated in Euro and
United States dollar and are on a fixed-rate basis. An amount of
US$0.1 million of the total gross interest bearing liabilities is
secured against equipment.
Capital Expenditure
For the year ended 31st March 2005, the Group invested US$21.5
million in plant, machinery, equipment, computer systems and
other tangible assets. All of these capital expenditures were
financed from internal resources.
Capital Commitments and Contingencies
In the previous financial year, the Group had committed to the
implementation of a new global enterprise resources planning
system to enhance the supply chain management. Most of the
investment was incurred during the financial year 2005 and was
financed from internal resources.
The Group expects to invest approximately US$48 million on capital
expenditure in the financial year 2006. During the financial year 2005,
the Group decided to establish a new manufacturing plant in
Qingyuan cit y in the northern part of Guangdong province. The plant
is expected to start operation in the fourth quarter of the calendar
year 2005 and the capital investment for the new plant in the
financial year 2006 is estimated at approximately US$22 million. It
will be financed from internal resources.
As of the financial year end date, the Group had no material
contingencies.
Employees
As at 31st March 2005, the Group had approximately 22,700
employees, an increase of 15.2% from 19,700 in the previous
financial year. Employee costs for the year ended 31st March 2005
were approxim ately US$107 million, as com pared to US$99 million
in the financial year 2004. The increase in the number of employees
was mainly in response to the sales increase at the ELP and
CMS businesses.
The Group has established an incentive bonus scheme and a share
option scheme for its employees, in which the benefits are
determined based on the performance of the Group and
individual employees.
Treasury Policies
The objective of the Group's treasury policies is to manage its
exposure to fluctuation in foreign currency exchange rates arising
from the Group's global operations. It is our policy not to engage in
speculative activities. Forward foreign exchange contracts are used
to hedge certain exposures.
Working Capital
The stock balance as at 31st March 2005 increased by 29.2% over
the balance at 31st March 2004 to US$124.2 million. The turnover
days increased from 69 days to 78 days. The increase in stock level
was primarily to cater for the increased demand for ELPs and
V. Smile in the first quarter of the financial year 2006. The stock
balance in relation to other businesses remained at a similar level
to the previous financial year. The trade debtors balance as at
31st March 2005 was US$162.3 million, an increase of 18.0% as
compared to that reported for the previous financial year. The
turnover days increased from 60 days in the previous financial year
to 65 days in the financial year 2005. The increase in trade debtors
was mainly due to an increase in sales at the ELP business in the
fourth quarter of the financial year 2005 compared to the sam e
period of the previous financial year, despite a decrease in sales at
the telecommunication products business for the same period.