Vtech 2006 Annual Report Download - page 8

VTech Holdings Ltd Annual Report 2006 05
In the United States, we are regaining
shelf space with the revamped product
lines. The new product line-up shows a
marked improvement in industrial
design and cost, which enables us to
meet customers’ expectations and
consumers’ needs better. It also
strengthens our competitiveness in the
marketplace. We intend to launch a
series of next-generation cordless
phones in spring 2007 and we will
continue to build our presence in the
VoIP cordless telephony market in the
United States.
The ELP business will continue to grow,
building on its leadership in Europe and
its growing market share in North
America as the V.Smile platform expands
and more new products are added to
our traditional ELP ranges. Through
V.Smile Baby and V.Flash, the V.Smile
range encompasses children from the
age of 9 months to the pre-teens. We
intend to strengthen our leadership
position in the educational video game
category by investing in R&D to ensure
a robust pipeline of product innovations.
We will continue to support our
products with advertising, PR, trade
promotion and point of sales displays
to ensure their success with the
consumer. At the same time, we will
take care to ensure that the expansion
is well managed and that costs are kept
well under control.
The global EMS industry is forecast to
remain on an uptrend and we expect
our CMS business to continue to grow
with the industry. We are taking great
care to manage growth at this business,
devoting considerable effort to
maintaining the exceptional levels of
quality and service which are
fundamental to its success. The new,
customer oriented organisational
structure will be supported by
expanded manufacturing facilities. The
R&D service offered to our customers is
expected to drive further growth for
the CMS business.
This overall optimistic outlook must be
tempered with caution as rising interest
rates may affect global economy
and dampen consumer confidence.
Furthermore, our success in the ELP and
CMS businesses, together with the
continuous growth of the TEL business
in Europe, is likely to invite more
competition. To stay ahead of our rivals,
we thus need to ensure that our
strategies are well executed.
All of our businesses did well in
countering the pressure of rising
production costs during the financial
year 2006. Oil prices remained high
throughout the financial year, resulting
in high prices for plastics, an important
raw material for many of our products.
Labour costs rose in southern China,
our manufacturing base, following the
raising of the minimum wage and the
appreciation of the Renminbi against
the US dollar.
It is likely that these trends will continue
and hence impose further cost
pressures on the Group during the
financial year 2007. Indeed, recently,
we have seen rises in component prices
such as printed circuit boards and
integrated circuits that may have an
impact on our businesses. We will
therefore have to continue to make
progress in cost control in order to
achieve sustainable growth.
In this regard, our new plant at
Qingyuan city, the northern
Guangdong province, is expected to
deliver cost savings over time. The
facility commenced operations in
November 2005 and will allow us to
transfer certain operations, particularly
the labour and electricity intensive
plastics production, to this lower
cost environment.
Appreciation
Clearly, the success we have achieved
would not have been possible without
the commitment and dedication of
everyone at the Group. I would
therefore like to thank my fellow
directors and senior management, as
well as all VTech employees for their
hard work. As we enter our 30th
anniversary, I would also like to extend
a special thanks to our suppliers,
bankers, shareholders and other
business partners for their support
during the past 30 years, which has
helped transform VTech into the Group
it is today.
Allan WONG Chi Yun
Chairman
Hong Kong, 21st June 2006
“I believe the Group is in very good shape and
well-poised for further growth in the financial
year 2007, with all initiatives on track.”
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