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ANNUAL REPORT 2009
Bringing Innovation to Life
HKSE : 303

Table of contents

  • Page 1
    HKSE : 303 Bringing Innovation to life aNNual REPoRT 2009

  • Page 2
    ... america, Europe and asia Pacific. apart from the well-known VTech brand, the Group has the rights to use the aT&T brand in connection with the manufacture and sale of its wireline corded and cordless telephones. Shares of VTech Holdings limited are listed on the Stock Exchange of Hong Kong limited...

  • Page 3
    FINaNCIal HIGHlIGHTS Group Revenue in Last 5 Years uS$ million Dividend per Share in Last 5 Years uS cents Earnings per Share in Last 5 Years uS cents 1,800 1,552.0 1,500 ...32.5 37.6 14.7 13.9 16.6 47.7 -1.2% pts -4.0% pts -4.0% pts -3.7% pts -15.2% pts VTech Holdings Ltd Annual Report 2009 1

  • Page 4
    ... 34.6% to uS58.5 cents, compared to uS89.4 cents in the financial year 2008. The Board of Directors (the "Board") has proposed a final dividend of uS41.0 cents per ordinary share, as compared to uS51.0 cents per ordinary share in the previous financial year. 2 VTech Holdings Ltd Annual Report 2009

  • Page 5
    .... Despite the decrease in sales, VTech continued to be the largest supplier in the uS cordless phone market, and we expanded our market share further during the financial year. In Europe, we continued to work on an original Design Manufacturing (oDM) basis with major fixed line telephone operators...

  • Page 6
    ... of the exit of a major competitor in North america. For the oDM business, we have recently signed a licensing agreement with Telstra, a leading telecommunications and information services company in australia, to become its direct supplier of fixed line handsets. The agreement will further increase...

  • Page 7
    ... Products Electronic learning Products 39.4% uS$570.5 million 53.4% uS$772.8 million 42.9% uS$620.7 million 39.1% uS$566.9 million asia Pacific 3.8% uS$55.2 million others Contract Manufacturing Services 3.4% uS$49.7 million 18.0% uS$260.6 million VTech Holdings Ltd Annual Report 2009...

  • Page 8
    ... DIVIDENDS The profit attributable to shareholders for the year ended 31st March 2009 was uS$143.2 million, a decrease of uS$72.5 million as compared to the previous financial year. The ratios of EBIT and EBITDa to revenue were 10.7% and 12.9% respectively. 6 VTech Holdings Ltd Annual Report 2009

  • Page 9
    ... otherwise 2009 128.0 9.0% 67 days 154.0 11.6% 73 days 2008 132.4 8.3% 72 days 182.2 11.6% 65 days Stocks average stocks as a percentage of Group revenue Turnover days Trade debtors average trade debtors as a percentage of Group revenue Turnover days VTech Holdings Ltd Annual Report 2009 7

  • Page 10
    ... PRODUCTS VTech is one of the world's largest suppliers of corded and cordless telephones. In North america, we are the largest player in the market, selling both VTech and aT&T branded products in major retail stores. outside North america, we mainly operate an oDM business. We supply products...

  • Page 11
    ...06 07 08 09 2.3% uS$12.8 million 3.7% uS$20.9 million uS$ million 280 240 200 160 128.4 120 80 40 158.2 233.1 248.3 260.6 Europe North america 45.4% uS$118.2 million 43.9% uS$114.4 million 18.0% asia Pacific 0 05 06 07 08 09 10.7% uS$28.0 million VTech Holdings Ltd Annual Report 2009 9

  • Page 12
    ...enter new product areas. CREaTING CoNNECTIVITY aT HoME In the second half of the financial year 2010, we will start shipping Integrated access Devices (IaDs), a new product category that we are jointly developing with Funkwerk Enterprise Communications GmbH, to our customers in Europe. VTech's IaDs...

  • Page 13
    ... phone market. During the financial year, VTech DECT 6.0 models for warehouse clubs sold well, while the aT&T DECT 6.0 products with Bluetooth technology outperformed the competition, as their Bluetooth feature became highly regarded by consumers. a new product category, aT&T cordless headsets...

  • Page 14
    ... building reading activities that focus on reading comprehension, phonics, sentence structure, word recognition and more. Designed with convenience in mind, Bugsby includes the software cartridge with every book title - no additional download is required. 12 VTech Holdings Ltd Annual Report 2009

  • Page 15
    ... V.Smile family. as the new flagship learning console, V-Motion met our sales expectations in spite of a challenging year for new platform products. overall, unit sales of both consoles and handhelds across the V.Smile range managed to hold their ground. VTech's electronic learning products again...

  • Page 16
    ...have grown with our customers and have built long-term partnerships with them. our excellence in product quality and service has earned us industry and supplier awards year after year, and enabled us to win new business through word-of-mouth recommendation. 14 VTech Holdings Ltd Annual Report 2009

  • Page 17
    ... (FY2009) ToTal uS$260.6 MIllIoN Professional audio Equipment Switching Mode Power Supplies 29.4% uS$76.6 million 25.4% uS$66.1 million Communications Products others Home appliances 9.8% uS$25.5 million 17.6% uS$46.1 million 17.8% uS$46.3 million VTech Holdings Ltd Annual Report 2009 15

  • Page 18
    ...) Highest closing price lowest closing price HK$50.95 (13th May 2008) HK$18.7 (25th November 2008) More than 400 staff members joined the Standard Chartered Hong Kong Marathon 2009. The VTech team showed their high spirits at the 2008 dragon boat race . 16 VTech Holdings Ltd Annual Report 2009

  • Page 19
    ...internal newsletter updates employees on important developments, and employees are encouraged to give feedback via email and through suggestion boxes. Staff and their families enjoyed the beautiful scenery at the trip to Tung Ping Chau, an island of Hong Kong. VTech Holdings Ltd Annual Report 2009...

  • Page 20
    ...In Hong Kong, the VTech Group has been recognised as a "Caring Company" by the Hong Kong Council of Social Service, in recognition of our work in relation to the community. During the financial year 2009, we again supported Business of Design Week and the Hong Kong awards for Industries in Hong Kong...

  • Page 21
    ... the ElP business. We are making more effort to optimise the size and the structure of our packaging to preserve the environment. The new packaging of our TEl products uses only two materials. The box size is reduced and it is printed with fewer colours. VTech Holdings Ltd Annual Report 2009 19

  • Page 22
    ... listing in Hong Kong. VTech Holdings limited's 2007 annual report won a Silver award in the electronics category of the 2008 annual Report Competition (aRC) awards. Telecommunication Products The lS5145 5.8GHz cordless phone was presented a Bronze award in the category of consumer electronics...

  • Page 23
    ... Learning Products VTech Electronics North america, l.l.C. was presented with Walmart's "Supply Chain award of Excellence" for its overall excellence in inventory management. Contract Manufacturing Services VTech Communications limited received a "Productivity and Quality award" at the Hong Kong...

  • Page 24
    CORPORATE GOVERNANCE REPORT Corporate GovernanCe praCtiCes VTech Holdings Limited is incorporated in Bermuda. The Company has its share listing on The Stock Exchange of Hong Kong Limited ("Hong Kong Stock Exchange") and had its share listing on the London Stock Exchange Plc ("London Stock Exchange...

  • Page 25
    ... by the Board. The Remuneration Committee met twice during the year. The Committee discussed and reviewed the remuneration packages of all executive directors and the granting of share options to the executive directors and senior management. - - - - VTech Holdings Ltd Annual Report 2009 23

  • Page 26
    ... by management review and by a programme of internal audits. The annual review also considered the adequacy of resources, qualifications and experience of staff of the Group's accounting and financial reporting function, and their training programmes and budget. Code of ConduCt Employees are...

  • Page 27
    ... of East Asia, Limited, China-Hong Kong Photo Products Holdings Limited and Li & Fung Limited. panG King fai, aged 53, Executive Director and President of the Group, holds BSc (Eng) from the University of Hong Kong, MPhil from Imperial College of Science, Technology and Medicine, London and PhD (EE...

  • Page 28
    ... Electrical and Electronics Engineers, Inc., US. nicholas p. delany, aged 57, President of VTech Communications, Inc., is responsible for the Telecommunication Products business in US specifically business development, sales, customer support, business intelligence processes, supply chain, logistics...

  • Page 29
    ..., project management and quality assurance. He holds a Master of Engineering degree in Manufacturing Systems Engineering from Warwick University, UK, and is a part-time lecturer of the Electronic Engineering Department of the City University of Hong Kong. VTech Holdings Ltd Annual Report 2009 27

  • Page 30
    ...business. Mr. LAM joined the Group in 1994 and held management positions in a number of areas including engineering, project management and marketing. Mr. LAM holds a Higher Diploma in Applied Science from the Hong Kong Polytechnic and a Higher Diploma in Management Services from the City University...

  • Page 31
    ...the movements in tangible assets are shown in note 7 to the financial statements. share Capital and share options Details of the movements in share capital and share options of the Company during the year are set out in note 18 to the financial statements. VTech Holdings Ltd Annual Report 2009 29

  • Page 32
    ... corporations (within the meaning of Part XV of the SFO) which were required to be recorded in the register kept by the Company pursuant to Section 352 of the SFO or notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code. 30 VTech Holdings Ltd Annual Report 2009

  • Page 33
    .... puBliC float Based on the information publicly available, the Company has maintained at least 25% of the total issued share capital of the Company to be held by the public at all times during the year ended 31st March 2009 and up to the date of this report. Major CustoMers and suppliers For the...

  • Page 34
    ... have been (i) entered into in the ordinary and usual course of business of the Group; (ii) either on normal commercial terms or terms no less favourable to the Group than terms available to or from allan WonG Chi yun Chairman Hong Kong, 15th June 2009 32 VTech Holdings Ltd Annual Report 2009

  • Page 35
    ... and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. KpMG Certified Public Accountants 8th Floor, Prince's Building 10 Chater Road Central, Hong Kong 15th June 2009 VTech Holdings Ltd Annual Report 2009 33

  • Page 36
    ... Approved and authorised for issue by the Board of Directors on 15th June 2009. (0.4) 143.2 (154.9) 440.2 21.2 215.7 (127.9) 452.3 allan WonG Chi yun Director panG King fai Director The notes on pages 35 to 57 form part of these financial statements. 34 VTech Holdings Ltd Annual Report 2009

  • Page 37
    ... from other sources. Actual results may differ from these estimates. 14 14 287.2 (45.0) 285.4 - 242.2 285.4 The notes on pages 35 to 57 form part of these financial statements. VTech Holdings Ltd Annual Report 2009 35

  • Page 38
    ... Revenue from the sale of goods is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. Revenue is stated net of sales taxes and discounts, after eliminating sales within the Group. 36 VTech Holdings Ltd Annual Report 2009

  • Page 39
    ... rights. Building construction costs are transferred to leasehold buildings when the assets are completed and put into operational use and depreciation will be provided at the appropriate rates in accordance with the depreciation policies specified in note (H). VTech Holdings Ltd Annual Report 2009...

  • Page 40
    ...-in-first-out basis, and comprises materials, direct labour and an appropriate share of production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less estimates of costs of completion and selling expenses. 38 VTech Holdings Ltd Annual Report 2009

  • Page 41
    ... is exercised (when it is transferred to the share premium account) or the option expires (when it is released directly to revenue reserves). s employee Benefits The Group operates a number of defined contribution retirement schemes throughout the world, including Hong Kong, and a defined benefit...

  • Page 42
    ...date. W segment reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services...the proceeds are received, net of transaction costs incurred. 40 VTech Holdings Ltd Annual Report 2009

  • Page 43
    ... areas: North America - the operations are principally the sale and distribution of telecommunication and electronic products. Europe - the operations are principally the sale and distribution of telecommunication and electronic products. Asia Pacific - the Group is headquartered in the Hong Kong...

  • Page 44
    ... Discretionary benefit in kind bonuses schemes US$ million US$ million US$ million 0.8 0.3 0.3 - - - - 1.4 2.5 0.6 0.6 - - - - 3.7 0.1 0.1 0.1 - - - - 0.3 Share-based payments (vii) US$ million 0.5 0.5 2008 Total US$ million 3.9 1.0 1.0 - - - - 5.9 42 VTech Holdings Ltd Annual Report 2009

  • Page 45
    ...089,000 2,625,001 - 2,689,000 1 1 - - 2 2008 Individuals - - 1 1 2 During the years ended 31st March 2008 and 31st March 2009, there were no amounts paid to directors and individuals for compensation for loss of office and inducement for joining the Group. VTech Holdings Ltd Annual Report 2009 43

  • Page 46
    ... share is based on 245.3 million (2008: 244.7 million) ordinary shares which is the weighted average number of ordinary shares in issue during the year after adjusting for the number of dilutive potential ordinary shares under the Company's share option scheme. 2009 million Weighted average number...

  • Page 47
    ... 2009 Note us$ million 2008 US$ million 3.7 (0.1) 0.2 3.8 3.8 Net book value at 1st April Amortisation Effect of changes in exchange rates Net book value at 31st March Leasehold land payments in respect of: Owner-occupied properties 2 3.8 (0.1) 0.1 3.8 3.8 VTech Holdings Ltd Annual Report 2009...

  • Page 48
    ... March 2009 amounted to US$26.4 million (2008: US$43.1 million). The majority of the Group's sales are on letter of credit and on open credit with varying terms of 30 to 90 days. Certain open credit sales are covered by credit insurance or bank guarantees. 46 VTech Holdings Ltd Annual Report 2009

  • Page 49
    ... with the terms of the sales. A provision is recognised for expected return claims, which included cost of repairing or replacing defective goods, loss of margin and cost of materials scrapped, based on past experience of the level of repairs and returns. VTech Holdings Ltd Annual Report 2009 47

  • Page 50
    ....0% 29.0% 6.0% 100.0% 70.0% 24.0% 6.0% 100.0% 2.5 (1.3) 1.3 2.5 2.1 (1.0) 1.4 2.5 The principal actuarial assumptions used for accounting purposes were: Discount rate Expected return on plan assets Future salary increases 2.0% 7.0% 5.0% 2.8% 7.0% 5.0% 48 VTech Holdings Ltd Annual Report 2009

  • Page 51
    ... the date of adoption of the 2001 Scheme, to grant options to full time employees of the Company or subsidiaries of the Group, including executive directors (but excluding non-executive directors) or any other person who devotes substantially all of his time and efforts to the business, management...

  • Page 52
    ... over the two years immediately preceding the grant date. (3) Expected dividend yield is based on historical dividends over one year prior to grant date. (4) Changes in the subjective input assumptions could significantly affect the fair value estimate. 50 VTech Holdings Ltd Annual Report 2009

  • Page 53
    ...returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost. The Group actively and regularly reviews and manages...29.1) 135.7 5 5 VTech Holdings Ltd Annual Report 2009 51

  • Page 54
    ... major financial institutions. Trade debtors are presented net of the allowance for doubtful debts. Credit risk with respect to trade debtors is limited due to the large number of customers comprising the Group's customer base and their dispersion across different industries and geographical areas...

  • Page 55
    ... in which they reprice or the maturity dates, if earlier. Deposits and cash 2009 2008 effective Within Effective Within interest rate one year interest rate one year us$ million US$ million Floating Fixed 0.72% 2.61% 95.3 191.9 2.23% 4.75% 61.2 224.2 VTech Holdings Ltd Annual Report 2009 53

  • Page 56
    ... maturities of these assets and liabilities. The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balance sheet date. 18.0 25.9 43.9 29.0 28.2 57.2 54 VTech Holdings Ltd Annual Report 2009

  • Page 57
    ....4) (1.7) (311.1) 246.7 12.1 234.6 246.7 net assets Capital and reserves Share capital Reserves shareholders' funds 18 19 386.2 12.3 373.9 386.2 (i) The amounts due from/(to) subsidiaries are unsecured, interest-free and have no fixed terms of repayment. VTech Holdings Ltd Annual Report 2009 55

  • Page 58
    ...March 2009 are set out below: fully paid issued share capital Ordinary HK$1,000 Deferred HK$5,000,000 percentage of interest held by the Group *100 name of subsidiary Incorporated and operating in Hong Kong: VTech Communications Limited principal activity Design, manufacture and sale of electronic...

  • Page 59
    ... IFRIC 13 (5) Improvements to IFRSs 2008 Improvements to IFRSs 2009 Presentation of Financial Statements Consolidated and Separate Financial Statements Eligible Hedged Items Vesting Conditions and Cancellations Operating Segments Customer Loyalty Programmes VTech Holdings Ltd Annual Report 2009 57

  • Page 60
    ... income statement for the year ended 31st March 2005 2006 2007 2008 2009 US$...share (us cents) 1,022.0 63.7 (6.8) 56.9 25.2 1,204.6 140.1 (11.3) 128.8 54.9 1,463.8 201.5 (18.6) 182.9 76.6 1,552.0 237.6 (21.9) 215.7 89.4 1,448.2 159.0 (15.8) 143.2 58.5 58 VTech Holdings Ltd Annual Report 2009

  • Page 61
    ... Chung prinCipal offiCe 23rd Floor, Tai Ping Industrial Centre Block 1, 57 Ting Kok Road Tai Po New Territories Hong Kong audit CoMMittee Denis Morgie HO Pak Cho (Chairman) William FUNG Kwok Lun Michael TIEN Puk Sun prinCipal BanKers The Hongkong and Shanghai Banking Corporation Limited Hang Seng...

  • Page 62
    INFORMATION FOR SHAREHOLDERS listinG Shares of VTech Holdings Limited are listed on the Stock Exchange of Hong Kong Limited. Ordinary shares are also available in the form of American Depositary Receipts through the Bank of New York Mellon. share reGistrars principal Butterfield Fulcrum Group (...

  • Page 63
    VTECH GRouP oF CoMPaNIES HEAD OFFICE VTech Holdings Limited 23rd Floor, Tai Ping Industrial Centre Block 1, 57 Ting Kok Road Tai Po, New Territories Hong Kong Tel: (852) 2680 1000 Fax: (852) 2680 1300 Website: www.vtech.com Email: [email protected] Japan VTech Electronics (Japan) Inc. ...

  • Page 64
    ... in Bermuda with limited liability) 23rd Floor, Tai Ping Industrial Centre, Block 1 57 Ting Kok Road, Tai Po, New Territories, Hong Kong Tel: +852 2680 1000 Fax: +852 2680 1300 Email: [email protected] www.vtech.com This annual report is printed on environmentally friendly paper