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VTech Holdings Ltd
4
Letter to Shareholders
debt to shareholders' funds ratio stood at
2.1% compared with 107.2% for the same
period of last year.The Group has adequate
financial resources to meet its working
capital requirements.
Good Performance from
Telecommunication Products
Telecommunication products were again
the mainstay of VTech’s revenue in the
financial year 2003, at US$609.8 million
accounting for 70.4% of total Group
revenue. Although this figure was 9.0%
lower than the financial year 2002 as a result
of the decrease in ODM sales, the result is
very encouraging.
The acquisition of the Lucent wired business
that triggered a broad-based restructuring
of our telecommunication products
business had given the opportunity to the
Group to enhance its operation that enabled
us to stay ahead of the industry. The
acquisition also brought VTech a powerful
licensed brand in AT&T that allowed the
Group to cover a wider spectrum of
customers and positioned it as the category
leader of many major retailers.This in turn
opens up a major source of revenue growth.
This improvement was demonstrated
during the financial year 2003 by the strong
sales performance of our AT&T and VTech
branded products. In a market made
particularly sluggish by weak consumer
sentiment, sales of our branded
telecommunication products increased
considerably, helping to maintain our
dominant share in the US cordless phones
market. For the financial year 2003, sales of
the 2.4GHz and 5.8GHz models, accounted
for over 50% of our telecommunication
products business revenue.
The customer-centric strategy adopted by
the telecommunication products business
also contributed substantially to the
business’operating results. During the
period under review, the business received
a number of important customer awards
for outstanding customer services,including
Sam’sClub’s “Supplier of the Year Award”,
Target’s “Electronics Instock Award”, and BJ’s
“Partnership Award”.
Challenges in the US for ELP
The ELP business continued to face severe
challenges in the US market, while
maintaining its dominance in our principal
European markets.Revenue for the financial
year 2003 decreased by 16.4% to US$161.9
million.
In the United States, the rise of certain
strong competitors had threatened the sales
of VTech products, particularly in the
pre-school and infant categories.The
popularization of personal computers,
television and hand-held games at the same
time, has eroded the size of the electronic
learning aids (ELA) segment of our ELP
business. Historically, the ELA category
accounted for over 50% of ELP revenue and
in the financial year 2003, it only accounted
for 21.0%.
Strong growth in
branded sales
Outstanding
customer
service