Vtech 2011 Annual Report Download

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Annual
Report
2011
HKSE : 303

Table of contents

  • Page 1
    HKSE : 303 Annual Report 2011

  • Page 2
    ... in North America, Europe and Asia Pacific. Apart from the well-known VTech brand, the Group is licensed to design, manufacture and distribute AT&T branded wireline telephones and accessories, as well as Telstra branded fixed line telephones in Australia. Shares of VTech Holdings Limited are listed...

  • Page 3
    ...-2.9% pts Group Revenue in Last 5 Years Gross Profit and Gross Profit Margin in Last 5 Years Profit Attributable to Shareholders of the Company and Net Profit Margin in Last 5 Years US$ ...to shareholders of the Company (US$ million) Net profit margin (%) VTech Holdings Ltd Annual Report 2011 1

  • Page 4
    ... our presence in the rest of the world. In electronic learning products (ELPs), we successfully launched two new platform products in North America and parts of Europe, which has laid an important foundation for future growth. Contract manufacturing services (CMS) again outperformed the global...

  • Page 5
    ... and cordless consumer phone market. Our new products include enhanced features, such as push-to-talk "walkie-talkie" capability for immediate communication throughout the house and HD audio for the clearest call experience. We have also revamped our successful Bluetooth® line of products that...

  • Page 6
    ... both hardware and software sales. They will be joined by InnoTabâ„¢, which will hit the shelves in Autumn. InnoTab is a multi-function educational tablet for children aged between four and nine years old. It combines interactive and animated reading, learning games, creative activities and a rich...

  • Page 7
    ... be shipped in the middle of this calendar year. The strong momentum in other regions is expected to continue, as the businesses in the Latin America and the Middle East is growing. In ELPs, our main focus of attention will be China. Development of new electronic learning and infant care channels...

  • Page 8
    ... our market leadership over the decades. MILLION US DOLLARS OF GROUP SALES IN FY2011 CORDLESS PHONE AND ELP MANUFACTURER WORLDWIDE VTECH PRODUCTS SOLD EVERY SECOND COUNTRIES AND REGIONS SELLING VTECH PRODUCTS 1,712.8 No. 1 2 75 34,000 EMPLOYEES GLOBALLY 6 VTech Holdings Ltd Annual Report 2011

  • Page 9
    ... benefited from the rising demands from the existing customers for our key product categories particularly switching mode power supplies, professional audio equipment and wireless products. For the Asia Pacific market, the increase in revenue mainly came from the higher sales of TEL and CMS products...

  • Page 10
    ... Group R&D Expenditure in Last 5 Years US$ million 70 60 51.3 50 40 45.2 56.9 56.8 56.8 Profit attributable to shareholders and Dividends The profit attributable to shareholders of the Company for the year ended 31 March 2011 was 30 20 10 0 07 08 09 10 11 8 VTech Holdings Ltd Annual Report...

  • Page 11
    ... from 61 days to 63 days. The increase in the trade debtor balance as at 31 March 2011 was mainly due to an increase in revenue in the fourth quarter of the financial year 2011 when compared with the corresponding period of the previous financial year. VTech Holdings Ltd Annual Report 2011 9

  • Page 12
    ... - Pre-school toys - Electronic learning aids - Bath toys - Smart vehicles • Platform products - InnoTab - V.Reader (Storio in Europe) Interactive e-Reading System - MobiGo Touch Learning System 34.7% % of Group Revenue (FY2011) Contract Manufacturing Services (CMS) VTech provides one-stop shop...

  • Page 13
    ... Revenue in Other Regions by Product Line for the year ended 31 March 2011 400 390.4 TEL Products 300 233.1 200 248.3 281.3 260.6 74.2% US$53.5 million ELPs 100 CMS 24.8% US$17.9 million 07 08 09 10 11 1.0% US$0.7 million Total: 0 US$72.1 million VTech Holdings Ltd Annual Report 2011 11

  • Page 14

  • Page 15
    ... financial year 2011. Infant products continued to be the best selling category, and our new range of bath toys did well. Year-on-year growth in the pre-school category was also strong, fuelled mainly by new generic and licensed products. CMS posted the strongest growth in North America, with sales...

  • Page 16

  • Page 17
    ... power supplies remained the top category in the region, followed by professional audio equipment and wireless headset products. During the financial year, we also gained new customers in the area of home appliances. # NPD EPoS Retail Tracking Service 2010 VTech Holdings Annual Report 2011 VTech...

  • Page 18

  • Page 19
    ...curriculum based pen-reading system, was launched in the first half of the financial year 2011. It is gradually establishing itself in our existing conventional toy channel, while we started work on building up additional electronic learning distribution channels. CMS saw a pick-up in growth in Asia...

  • Page 20
    ... the environment, and we take steps throughout the product lifecycle to reduce environmental impacts. Product Planning R&D Packaging Design Recycling VTech Product Lifecycle Shipping Manufacturing Procurement Processes Facilities Distribution 18 VTech Holdings Ltd Annual Report 2011

  • Page 21
    ...number of measures to reduce electricity consumption. Energy saving or LED lights are replacing traditional ones. Our TEL operation has replaced diesel water heaters in dormitories with more efficient pumped water heaters. Our CMS operation has improved the management of the air conditioning systems...

  • Page 22
    ...broad headings of sponsoring innovation, helping children and general corporate philanthropy. VTech is well known for its contribution to charities and youth organisations also. We are recognised as a "Caring Company" by the Hong Kong Council of Social Service for our work for the community. During...

  • Page 23
    ... voice their opinions. We maintain open communication with employees at all levels, through channels such as the website, internal newsletter, meetings and informal gatherings to communicate plans and policies. Investor Communications VTech's investor relations programme keeps investors abreast of...

  • Page 24
    ... services achieved record revenue in the financial year 2011. Over 45 Million Handsets Shipped VTech shipped over 45 million handsets in the financial year 2011. The Group is now selling corded and cordless phones to more than 60 countries and regions worldwide. Supporting the Hong Kong...

  • Page 25
    ... LS6425 DECT cordless phone was named a "Best Buy" model by the editors of Consumers Digest magazine in the United States. V.Reader - The World's First Interactive e-Reading System for Children VTech introduced V.Reader, the world's first interactive e-reading system for children, in North America...

  • Page 26
    ... Corporate Governance Practices VTech Holdings Limited is incorporated in Bermuda and has its shares listed on The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). The corporate governance rules applicable to the Company are the Code on Corporate Governance Practices (the "Code") as set...

  • Page 27
    ... On 31 May 2011 (the date of this Annual Report), the Audit Committee met to review the audited Group financial statements and reports for the year ended 31 March 2011 in conjunction with the Company's external auditor and senior management before recommending them to the Board for consideration and...

  • Page 28
    ... securities transactions by directors and senior management. After specific enquiry, all directors of the Company confirmed that they have complied with the required standard of dealings set out in the Model Code throughout the year ended 31 March 2011. 26 VTech Holdings Ltd Annual Report 2011

  • Page 29
    ... Hong Kong Applied Science and Technology Research Institute Company Limited, a non-executive director and a member of the Audit Committee of The Hongkong and Shanghai Banking Corporation Limited, and a non-executive director of Tristate Holdings Limited. VTech Holdings Ltd Annual Report 2011 27

  • Page 30
    ...years of sales and management experience in the industrial, retail, construction and mining industries in Asia, Europe and South Africa. He also has 10 years of experience in developing supply chain systems with leading corporations in North America including The Stanley Works, Inc. Mr. DELANY holds...

  • Page 31
    ... of the Group, including executive directors (but excluding non-executive directors) to take up shares of the Company in accordance with the terms of the 2001 Scheme. VTech Holdings Ltd Annual Report 2011 Reserves Movements in the reserves of the Group and the Company during the year are set out in...

  • Page 32
    ... short positions of the directors and chief executives of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the "SFO")) as recorded in the register maintained by the...

  • Page 33
    ..., Sale or Redemption of Listed Shares The Company has not redeemed any of its shares during the year. Neither the Company nor any of its subsidiaries has purchased or sold any of the Company's shares during the year. Allan WONG Chi Yun Chairman Hong Kong, 31 May 2011 VTech Holdings Ltd Annual Report...

  • Page 34
    ... and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. KPMG Certified Public Accountants 8th Floor, Prince's Building 10 Chater Road Central, Hong Kong 31 May 2011 32 VTech Holdings Ltd Annual Report 2011

  • Page 35
    ... Director PANG King Fai Director The notes and principal accounting policies on pages 36 to 61 form part of these financial statements. Details of dividends payable to shareholders of the Company attributable to the profit for the year are set out in note 5. VTech Holdings Ltd Annual Report 2011...

  • Page 36
    .../(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 13 243.1 The notes and principal accounting policies on pages 36 to 61 form part of these financial statements. 34 VTech Holdings Ltd Annual Report 2011

  • Page 37
    ...year Total comprehensive income for the year Final dividend in respect of the previous year Interim dividend in respect of the current year Shares issued under share option scheme Equity-settled share based... 36 to 61 form part of these financial statements. VTech Holdings Ltd Annual Report 2011 35

  • Page 38
    ... with the disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"). The IASB has issued new and revised IFRS, amendments and interpretations...

  • Page 39
    ... the sale of goods is recognised 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. H Tangible Assets and Depreciation (ii) Revenue from the provision of services is...

  • Page 40
    ...progress, interest in subsidiaries, interest in associates and other investments, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. 38 VTech Holdings Ltd Annual Report 2011

  • Page 41
    ... share of production overheads incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less estimates of costs of completion and selling expenses. VTech Holdings Ltd Annual Report 2011...

  • Page 42
    ... by employees is recognised as an expense in the consolidated income statement on a straight-line basis over the average period until the benefits become vested. If the benefits vest immediately, the expense is recognised immediately in profit or loss. 40 VTech Holdings Ltd Annual Report 2011

  • Page 43
    ...value of the options granted and the cost of Awarded Shares are recognised as employee share-based compensation expense and credited to capital reserve under equity over the vesting periods. At each balance sheet date, the Group revises its estimates of the number Awarded Shares that are expected to...

  • Page 44
    ... located in North America, Europe, Asia Pacific and elsewhere are set out in the table below. Each of the above reportable segments primarily derive their revenue from the sale of telecommunication products, electronic learning products and products from contract manufacturing services to customers...

  • Page 45
    ... 10(a) 10(b) For the year ended 31 March 2011, approximately 14% (2010: 17%) of the Group's revenue is derived from a single external customer. This revenue is attributable to the North America segment. Details of concentrations of credit risk of the Group are set out in note 19(a). 2 Operating...

  • Page 46
    ... - 897,000 1,397,001 - 1,461,000 - - 1 1 2 2010 Individuals - 1 - 1 2 During the years ended 31 March 2010 and 31 March 2011, there were no amounts paid to directors and individuals for compensation for loss of office and inducement for joining the Group. 44 VTech Holdings Ltd Annual Report 2011

  • Page 47
    ... of deemed issue of shares under the Company's share option scheme for nil consideration Weighted average number of ordinary shares (diluted) at 31 March (a) Hong Kong Profits Tax has been calculated at the rate of 16.5% (2010: 16.5%) on the estimated assessable profit for the year. (b) Overseas...

  • Page 48
    ...year Written back on disposals Revaluation Effect of changes in exchange rates At 31 March 2011 Net book value at 31 March 2011...- (0.4) - 0.3 11.5 0.2 - - 0.5 12.2 Construction in progress US$ million 9.5 0.2 - (2.8) - 6.9... 111.2 6.9 - 6.9 435.3 21.7 457.0 46 VTech Holdings Ltd Annual Report 2011

  • Page 49
    ...buildings comprises: Hong Kong Medium-term leasehold land and buildings (less than 50 years but not less than 10 years) Overseas Freehold land and buildings Short-term leasehold buildings Net book value of revalued land and buildings...certain sites in the PRC. VTech Holdings Ltd Annual Report 2011 47

  • Page 50
    ...The tax losses arising from Hong Kong operations do not expire under current tax legislation. The tax losses arising from the United States operations expire up to 20 years after the relevant accounting year end date, depending on the relevant jurisdiction. 48 VTech Holdings Ltd Annual Report 2011

  • Page 51
    ... past due. Based on past experience of the Group, it is determined that no impairment allowance is necessary in respect of these balances as these balances are considered to be fully recoverable. The Group does not hold any collateral over these balances. VTech Holdings Ltd Annual Report 2011 49

  • Page 52
    ... 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. 50 VTech Holdings Ltd Annual Report 2011

  • Page 53
    ...defined benefit scheme (the "Scheme") operated for Hong Kong employees, contributions made by the Group during the year were calculated based on advice from Watson Wyatt Hong Kong Limited, a Towers Watson company ("Towers Watson"), independent actuaries and consultants. The Scheme is valued annually...

  • Page 54
    ... employee is that the total number of shares issued and to be issued upon exercise of options granted and to be granted in any 12-month period up to the date of the last grant does not exceed 1% of the relevant class of shares in issue. The Company can grant further options in excess of this limit...

  • Page 55
    ... Company from time to time (excluding shares which have already been transferred to employees on vesting). The Share Purchase Scheme has a term of 20 years from the Adoption Date. During the financial year since the Adoption Date, there were no shares purchased, granted and awarded. VTech Holdings...

  • Page 56
    ...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... 6.8 2.3 335.1 54 VTech Holdings Ltd Annual Report 2011

  • Page 57
    ...cash are placed with major financial institutions with sound credit ratings. 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...

  • Page 58
    ... regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term. 56 VTech Holdings Ltd Annual Report 2011

  • Page 59
    ... date the fair value is remeasured. The positive fair values of derivative financial instruments designated as fair value through profit or loss and cash flow hedges at 31 March 2011 were US$0.1 million (2010: US$0.3 million) and US$0.3 million (2010: US$nil) respectively. VTech Holdings Ltd Annual...

  • Page 60
    ...-cancellable operating leases are as follows: Land and buildings In one year or less Between one and two years Between two and five years In more than five years 55.9 6.5 62.4 42.4 2.8 45.2 2010 US$ million 14.6 12.9 32.1 36.7 96.3 10.9 8.8 6.7 1.6 28.0 58 VTech Holdings Ltd Annual Report 2011

  • Page 61
    ... held by the Group *100 Name of subsidiary Incorporated/established and operating in Hong Kong: VTech Communications Limited Fully paid issued share capital Ordinary HK$1,000 Deferred HK$5,000,000 Ordinary HK$5,000,000 Principal activity Design, manufacture and sale of electronic products Design...

  • Page 62
    ... services of the employees who have been awarded shares of the Company under the Share Purchase Scheme through their continued employment with the Group. During the financial year since the Adoption Date, there were no shares purchased, granted and awarded. 60 VTech Holdings Ltd Annual Report 2011

  • Page 63
    ...expenses. Notes 16, 17 and 19 contain information about the assumptions and their risk factors relating to pension scheme obligations, fair value of share options granted and financial instruments. Other key sources of estimation uncertainty are as follows: VTech Holdings Ltd Annual Report 2011 61

  • Page 64
    ... Profit for the year Attributable to: Shareholders of the Company Non-controlling interests Profit for the year Basic earnings per share (US cents) ...225.5 (20.2) 205.3 206.5 (1.2) 205.3 83.7 2011 US$ million 1,712.8 220.3 (19.1) 201.2 202.0 (0.8) 201.2 81.5 62 VTech Holdings Ltd Annual Report 2011

  • Page 65
    ... WANG Shui Chung Principal Office 23rd Floor, Tai Ping Industrial Centre Block 1, 57 Ting Kok Road Tai Po, New Territories Hong Kong Principal Bankers The Hongkong and Shanghai Banking Corporation Limited Hang Seng Bank Limited Standard Chartered Bank (Hong Kong) Limited Audit Committee Denis...

  • Page 66
    ... Block 1, 57 Ting Kok Road Tai Po, New Territories Hong Kong Tel: (852) 2680 1000 Fax: (852) 2680 1788 Email: [email protected] Share Information Board Lot Issued Shares as at 31 March 2011 100 shares * 248,296,133 shares * The board lot size for trading VTech Holdings Limited shares...

  • Page 67
    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] Germany VTech Electronics Europe GmbH ...

  • Page 68
    VTech Holdings Ltd (Incorporated 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