Vtech 2007 Annual Report Download - page 5

VTech Holdings Ltd
Annual Report 2007 3
The gains in North America were the
result of the success of the new product
lines. The 5.8GHz phones, together
with the AT&T 2.4GHz products using
proprietary technology developed
in-house, proved popular with
consumers and continued to win us
more shelf space from customers.
Several new models were introduced
in January at the 2007 Consumer
Electronics Show where our focus
was on innovative design and new
technology. Our design capabilities
were showcased by the Digital
Enhanced Cordless Telecommunications
(DECT) 6.0 models, whose cutting-edge
slim handsets were exceptionally well
received. On the technology side, we
were able to show a cordless system
with Bluetooth connectivity and the
infoPhone™, an Internet enabled phone
that allows people to check email and
information without the need to turn
on a computer.
As we noted at the interim report, the
European market had suffered from
excess inventory, especially during the
fi rst half of the fi nancial year. Hence,
despite a pick up of sales in the second
half over the fi rst half, revenue from
this market still recorded a decline as
compared with the fi nancial year 2006.
Revenue at the electronic learning
products (ELP) business reached an
all time high as we saw sales growth
in all product ranges in all major
markets. The traditional ELPs performed
especially well, with a double digit sales
increase. A number of new products
helped boost sales, including Nitro
Vision and a new line of interactive
animal character play sets for toddlers,
SmartVille. Nitro Notebook Pink was
included in the Toys“R”Us “Fabulous 15
The Best of the Holiday Season” list.
V.Smile continued its success as a
platform based product and eight new
titles were added in the calendar year
2006. V.Smile Baby, targeting children
between the ages of nine months
and three years old, was added to the
range. It appeared on the shelves in the
fi rst half of the fi nancial year and sales
have been encouraging. V.Flash, aimed
at children aged six and up, got off to a
slower start following its late launch in
September 2006.
The contract manufacturing services
(CMS) business achieved record revenue
for the third year in a row as we grew
our sales with existing customers. Once
again, the business outperformed
the global Electronic Manufacturing
Services (EMS) market. The switching
mode power supplies, professional
audio equipment and industrial printing
categories experienced particularly
strong demand and marked growth
was seen in the US market.
The success of the CMS business
demonstrates the attraction of a
complete one-stop shop service from
design to execution and the very high
quality levels achieved. Customer
service levels improved further during
the fi nancial year as we cut order
processing time signifi cantly and again
reduced the failures per million units of
output (ppm).
All three businesses did well to counter
cost pressures during the fi nancial year
despite high materials prices, as well
as rising labour costs and overheads in
China, following the appreciation of
the Renminbi. Greater economies of
scale, as our production volume has
expanded, have mitigated these cost
pressures, and we have been able to
raise productivity through effi ciency
gains. The new plant at the city of
Qingyuan in the northern part of
China’s Guangdong province, to which
we have begun transferring some
production, is also beginning to make
a positive impact.
CHANGES IN DIRECTORS
Our Deputy Chairman, Mr. Albert LEE
Wai Kuen, retired with effect from
1st April 2007. He has been with the
Group since 1984 and I would like to
express my sincere appreciation to him
for his valuable contribution over two
decades. He will continue to play a role
as an adviser to the Group.
Following Mr. LEE’s retirement, two new
Executive Directors were appointed in
April 2007. They are Mr. Edwin YING
Lin Kwan, Group Chief Operating
Offi cer and Mr. PANG King Fai, Group
Chief Technology Offi cer.
The succession of good results achieved
in recent years testifi es to VTech’s ability
to develop sound business strategies
and execute them well. I believe we
have developed a solid foundation for
future expansion.
03VtechLettertoShareholders(33 2007/7/511:38:49PM