Vtech 2001 Annual Report Download - page 11

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VTech Holdings Ltd Annual Report 2001
9
The key features of the plan are:
Senior management is being strengthened through the
appointment of a new Chief Operating Officer to oversee
the restructuring, ensure adherence to schedules and
targets, strengthen financial control and seek further ways
to raise the efficiency of the Group.
The consumer telephone operations in the United States
are being rationalized and consolidated into locations at
Beaverton, Oregon and San Antonio, Texas. The R&D
structure has been reorganized to achieve greater cost
efficiencies and the New Jersey and UK centres have
been closed. Factories in Mexico, which were acquired
from Lucent in 2000 in connection with the consumer
telephone business, have been closed down and
premises are being sold.
The electronic learning products (ELP) operations in Europe
are being centralized under one regional management to
boost efficiency. The operations in Hong Kong and
Dongguan in mainland China are being streamlined.
The information appliances business has been integrated
into the consumer telephone business unit, to leverage
joint technology, marketing and sales channels.
The multimedia communication products unit has been
merged with the contract manufacturing services unit.
e-Business related services, which are long-term
investments and have not yet contributed to Group results,
are being downsized and re-organized to achieve synergies
with other Group companies.
Executive Directors have agreed voluntarily to reduce their
pay by 20%.
VTech Holdings Ltd Annual Report 2001
9
Review of Operations
Group Performance
Group turnover increased by 27.6% over the financial year
2000 to US$1,334.9 million. The increase is due to sales of
AT&T branded products acquired from Lucent. Nevertheless,
the Group recorded a loss of US$215.0 million for the year
ended 31st March 2001.
As advised in our profit warning announcement on 26th
March 2001, the losses were primarily due to the poor
performance and unfavourable business conditions of the
Lucent consumer telephone business which we acquired
last year. This led to working capital constraint which resulted
in broad-based business restructuring and consolidation
costs as well as adjustments to certain intangible assets.
External factors, including the weak Euro and component
shortages also affected the performance of the Group. The
costs of our restructuring have largely been recognized in
the financial year 2001 and, together with the associated
asset impairment charges amount to US$110.4 million. The
principal items are: severance costs of US$36.0 million; fixed
asset impairment charges of US$17.2 million as a result of
the pending divestiture of the Mexico factory and repair
facilities; intangible impairment charges of US$25.2 million
in respect of the research and development acquired for the
development of mobile phones; inventory write-downs on
discontinued products of US$17.1 million and other closure
costs of US$14.9 million.