Vtech 2008 Annual Report Download - page 6

VTech Holdings Ltd Annual Report 2008
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Nevertheless, we remain positive about our future. Our track
record in product innovation, dominant position in many
markets, strong balance sheet and operational excellence
should allow us to strengthen our competitive position. We will
continue to manage costs closely and focus on our four strategic
drivers for expansion.
In the TEL business, ODM business is expected to grow, as
competition weakens and we continue to develop emerging
markets. In addition to geographic expansion, we are looking to
the future of the telecommunications industry and developing
innovative products to capture the potential presented by new
technologies. In December 2007, we formed a joint venture
with Funkwerk Enterprise Communications GmbH to develop
integrated access devices that will start to contribute to sales in
the  nal quarter of the  nancial year 2009.
Although we expect the branded business in North America to
be a ected by the slowing US economy, we have developed
new product categories that will bring incremental sales. In
the third quarter of the  nancial year 2009, our  rst AT&T o ce
headsets will be on the shelf and at the beginning of 2009 our
new range of enterprise phones for medium sized business will
be available.
In the ELP business, market conditions will be challenging. Not
only is the US economy slowing, but competition is increasing,
while the bene t we have reaped from an appreciating Euro are
unlikely to continue.
Nonetheless, the global toy business has historically performed
relatively well during economic downturns. We also have a
sound strategy that should allow us to grow the business.
Continued innovation in products remains at the core of this
strategy and this will help rejuvenate the V.Smile range.
V-Motion™, an interactive educational gaming system that
engages both minds and bodies, is already on the shelves.
It will be joined by Cyber Pocket™, a new handheld version
to complement the V.Smile Pocket™. Both of these products
feature USB connectivity, o ering more value to consumers.
Following the success of V.Smile, which brought a new
dimension to the ELP business, we are working to create other
new categories that can become major growth drivers. One
of the new product lines to be launched during the  nancial
year 2009 is KidiCreative™, which o ers high-tech creative play
for children.
The prospects for the CMS business look promising and we
anticipate further sales increases from both existing and
new customers. We will continue to focus on medium sized
customers and maintain our edge in quality and cost. In mid
2007, we set up a six sigma team to improve operational
e ciency and this is beginning to yield results. Work processes
are being streamlined and automation increased in order
to reduce the dependence on labour, raise productivity and
improve product quality. We are also consolidating our supplier
base, strengthening relationships with fewer suppliers to ensure
we achieve the most favourable pricing.
PROPOSED LONDON DELISTING
VTech is currently listed on both the Hong Kong Stock Exchange
and the London Stock Exchange, and the Board has been
considering whether this dual listing arrangement is bene cial
to the Company and its shareholders. After careful consideration,
the Board has come to the view that the relatively signi cant
compliance costs and administrative burdens of maintaining
a London listing are not justi ed by the very limited trading
volume of the Company’s shares in that market, and hence it is
no longer in the Company’s best interest to maintain its listing
status on the London Stock Exchange. Accordingly, we propose
to delist from the London Stock Exchange, while maintaining
our listing on the Hong Kong Stock Exchange and a Special
General Meeting will be convened in due course, and a circular
will be despatched to shareholders.
APPRECIATION
As ever, I would like to thank my fellow directors and all sta for
their e orts throughout the year, which have made it successful
despite di cult operating conditions.
We should not underestimate the challenges that lie ahead,
but with leadership in our markets, a strong balance sheet and
a highly e cient manufacturing capability, VTech should
bene t in the longer term from the industry consolidation that
will ensue.
Allan WONG Chi Yun
Chairman
Hong Kong, 3rd July 2008
LETTER TO SHAREHOLDERS