Vtech 2004 Annual Report Download - page 5

3
VTech Holdings Ltd Annual Report 2004
in the 3-7 years
old category. As
importantly, the new
2004 line-up, including V.Smile
cartridges, features some of the world’s best-known cartoon
characters, significantly enhancing its attraction.
Stable Contribution from Contract
Manufacturing Services
The contract manufacturing services business again
produced a stable contribution to the Group. Its ability to
deliver high quality products, as well as flexible and price
competitive services contributed to the organic growth of
the business.
During the financial year 2004,
contract manufacturing services
retained its focus on medium-
sized customers seeking
precision products. The Group’s
manufacturing know-how and
its outstanding customer service
were key to maintaining stable
margins for this business.
To expand the business further, contract
manufacturing services succeeded in gaining additional
quality certifications that will enable VTech to enter the
production of automotive parts and medical equipment.
Following the full operation of the new R&D centre in
Shenzhen, the business has been able to offer full turnkey
solutions to customers and the enhancement in customer
service level resulted in a record number of customer awards
in the financial year 2004.
Strong Financial Position
The continuing improvement in the Group’s results and
productivity leaves VTech strongly financed. Our net cash
position improved from US$67.7 million as at 31st March
2003 to US$102.6 million as at 31st March 2004.
Profit/(Loss) Attributable to Shareholders in Last 5Years
US$ million
0
(40)
(80)
(120)
(160)
(200)
40
80
(215.0)
01
11.2
02
40.8
03
46.3
04
44.8
00
phones in North
America. At the same
time, the business
recorded strong
growth in Europe,
where we continued
to work closely with
major UK and German
telecommunication
operators as well as
the Swissvoice Group.
Strong Profit
Rebound at Electronic
Learning Products
The profit of the Group was supported by
a considerable improvement in
profitability at the electronic learning
products business, despite a decline in
revenue when compared to the previous
financial year.
The revenue decline occurred in the US
market where reduced shelf space from
retailers caused a reduction in sales
revenue. Sales in Europe, however,
continued to be strong and enabled us to
sustain our leadership position in major
European market segments.
The improved profitability was the result
of a leaner and more efficient structure
established by the present management
of electronic learning products business.
A series of cost rationalisation campaigns
was executed in the last quarter of the
financial year 2003. As a result, substantial
savings were achieved in advertising and
promotion expenses as well as selling
and general administrative expenses
during the financial year 2004.
The new electronic learning product lines
for 2004 achieved a breakthrough when
in October 2003 we launched the TV
Learning System, V.Smile, a first of its kind
TV game console that combines
education and entertainment for children
Letter to
Shareholders