Vtech 2002 Annual Report Download - page 26

VTech Holdings Ltd24
Group Results
The consolidated turnover for the year ended 31st March
2002 was US$959.8 million, which represented a drop of 28.
1% from that of last year. The decrease was mainly
attributable to the Group’s strategy to focus on higher margin
products in the telecommunication products business and
strong competition in electronic learning products business.
The gross profit margin for the year improved from 24.1% to
30.1%. The operating result before restructuring and
impairment charges for the year was a profit of US$37.0
million which compared to a loss of US$89.7million last year.
This significant improvement was attributable to a
substantial reduction in all categories of operating expenses
due to cautious control. The Group’s profit attributable to
shareholders for the year was US$11.2 million as compared to
a loss attributable to shareholders of US$215.0 million last
year. This resulted from the focus on higher margin products,
reduction in operating costs and a significant reduction in
restructuring and impairment charges during this year.
Earnings per share for the year was US 5.0 cents as compared
to a loss per share of US 96.7 cents for last year.
Liquidity and Financial Resources
The Group’s financial position has continued to improve. Net
cash inflow from operating activities during the year increased
by US$186.1 million over last year’s US$39.3 million net cash
outflow. This was mainly due to the reduction in stocks, which
fell from US$187.5 million at the end of the last year financial
year to US$94.4 million at the end of this year, and reduction
in debtors, which fell from US$195.3 million at the end of last
year to US$128.9 million at the end of this year. This freeing
of cash flow was attributable to the Group’s determination
to improve its supply chain management and business
processes.
Total debts position improved by 61.6% from US$249.6
million at the end of last year to US$95.8 million at the end of
this year. Long-term borrowings improved from US$136.9
million at the end of last year to US$65.2 million at the end of
this year. As at 31st March 2002, the ratio of total debts to
shareholders’ funds improved from 312.0% to 107.2%.
Including cash at banks and deposits, the net debt to
shareholders’ funds improved from 241.8% at the end of last
year to 36.4% at the end of this year. A majority of the Group’s
borrowings are denominated in United States dollars and are
on a floating rate basis.
The maturity profile of indebtedness is contained in the
note 17 to the financial statements. A small portion of the
Financial Review
borrowings is secured against land and buildings, which
amounts to approximately US$2.3 million.
With cash on hand and available banking facilities at year
ended 31st March 2002, the Group has adequate working
capital to meet its future working capital requirements.
Approximately 80% of cash and deposits are denominated in
United States dollars and 15% are denominated in United
Kingdom Sterling and Euro.
Capital Expenditure
During the year, the Group invested US$13.3 million in plant,
machinery, equipment and other tangible assets. This was
financed primarily from internal resources.
Treasury Policies
The objective of the Group’s treasury policies is to manage its
exposure to fluctuation in foreign currency exchange rates
and interest rates on its interest bearing loans. It is our policy
not to engage in speculative activities. Forward foreign
exchange contracts and interest rate swaps were used to
hedge certain exposures. The detailed information is
contained in the note 22 to the financial statements.
Material Disposals
The sale of the Group’s facility in Reynosa, Mexico was
completed in August 2001, realizing US$7.9 million. Part of
the building in Guadalajara, Mexico was sold at a net proceed
of US$11.8 million with the last installment of US$3.1 million
received in April 2002. The Group is actively looking for buyers
for the remaining part of the building. In addition, the Group
entered into agreements to sell two properties in Hong Kong
at aggregate proceeds of US$4.7 million. The sales are
targeted for completion by September 2002.
Material Legal Proceedings
On 7th June, 2002, the Group and Lucent Technologies Inc.
(“Lucent’) settled the lawsuit filed by the Group against Lucent
in January 2001 in a mutually satisfactory manner. There was
no admission of wrongdoing by either party. Under the terms
of the settlement, Lucent has agreed to adjust the purchase
price of the acquisition downward by US$50.0 million, such
amount to be fully settled in cash on or before 3rd July 2002.
Employees
As of 31st March 2002, the Group had approximately 14,200
employees. The Company 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.