Vtech 2008 Annual Report Download - page 5

VTech Holdings Ltd Annual Report 2008 3
fed into increased prices for other raw materials used in our
manufacturing. At the same time, operating and labour costs
continued to rise in mainland China, compounded by in ation
and a strong appreciation of the Renminbi against the US dollar.
While these increases pressured all manufacturers, VTech
continued to build on its track record of achieving margin
improvement, based on our know-how in R&D and
manufacturing. We have leveraged our economies of scale,
re-engineered our products and increased our productivity
through better utilisation of our manufacturing capacity.
At the same time, stringent quality control ensured that our
products met customer expectations, helping to raise sales
at our businesses.
The TEL business posted higher revenue, despite a decline in US
sales. In North America, we pursue a branded business strategy
selling under the VTech and AT&T brands, and the overall
US market contracted owing to the slowing economy. We
nonetheless increased market share as our product innovation
enabled us to gain a lead over the competition. In particular,
we are bene ting from the convergence of the market towards
DECT 6.0 technology, where we have a very well received
product line-up.
The stronger performance came from the Original Design
Manufacturing (ODM) business, under which we manufacture
products for major  xed line telephone operators in Europe and
other well-known brand names. We are also increasingly selling
to distributors in the Asia Paci c and other emerging markets,
with notable sales growth from India, Brazil and Australia.
Revenue at the ELP business reached another record high, led
by continuing strength in the traditional ELPs. We secured more
shelf space in North America and Europe, and gained further
ground in emerging markets. With the basic V.Smile console
now in its fourth year, sales of the V.Smile range slowed and in
the calendar year 2008 we have added three new members to
the V.Smile family to augment the basic console.
The CMS business achieved record revenue for the fourth
consecutive year and we are increasingly raising our pro le in
the electronic manufacturing services industry. The business was
able to mitigate the impact of cost increases through economies
of scale and leveraging the Group’s procurement power. We
also succeeded in passing on some cost increases to customers.
OUTLOOK
It is prudent not to foresee growth for the  nancial year 2009,
as economic conditions in our markets, especially the United
States, are worsening. In addition, cost pressures will continue
due to the high oil price, rising labour costs and in ation
in mainland China.
Dear Shareholders,
Despite challenging economic conditions, VTech reported
record revenue and pro t, and we were able to expand net
pro t margin for a third consecutive year. We have built a
solid foundation for our operations, as we strengthened our
leading positions in the telecommunication products (TEL)
and electronic learning products (ELP) industries and increased
our pro le in contract manufacturing services (CMS).
The solid result re ects the success of our strategy, with its focus
on four key areas:
• Product innovation
• Gains in market share
• Geographic expansion
• Operational excellence
RESULTS
Revenue for the Group increased by 6.0% over the  nancial year
2007 to US$1,552.0 million. Pro t attributable to shareholders
rose by 17.9% to US$215.7 million, while earnings per share
increased 16.7% to US89.4 cents. The Board of Directors
(the “Board“) has proposed a  nal dividend of US51.0 cents per
ordinary share. Together with the interim dividend of US12.0
cents per share, this gives a total dividend for the year of
US63.0 cents per ordinary share. Excluding a special dividend
of US30.0 cents per share in the  nancial year 2007, the total
dividend per share for the  nancial year 2008 increases 26.0%
over the previous  nancial year. The increase in dividend
payout demonstrates our commitment to shareholders and
the strength of our operations.
OPERATIONS
Rising costs posed a challenge to all our businesses during
the  nancial year 2008. High oil prices led to increased
prices for plastics while higher commodity prices generally
Pro t Attributable to Shareholders in Last 5 Years