Vtech 2013 Annual Report Download

Download and view the complete annual report

Please find the complete 2013 Vtech annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 76

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76

HKSE : 303
Annual Report 2013
E0_Vtech051_Cover.indd 2 13年5月29日 上午3:40

Table of contents

  • Page 1
    HKSE : 303 Annual Report 2013

  • Page 2
    ... VTech brand, the Group is licensed to design, manufacture and distribute AT&T branded wireline telephones and accessories in North America and China, as well as Telstra branded fixed-line telephones in Australia. Shares of VTech Holdings Limited are listed on The Stock Exchange of Hong Kong Limited...

  • Page 3
    ... 143.2 13.5 11.8 10.8 100 9.9 10.9 8 12 09 10 11 12 13 Gross profit (US$ million) Gross profit margin (%) Profit attributable to shareholders of the Company (US$ million) Net profit margin (%) VTech Holdings Ltd Annual Report 2013 1

  • Page 4
    ... their working and living environment. 1 2 Source: NPD Group, Retail Tracking Service. Ranking based on total retail sales in the Infant Toys category, for the combined market of UK, France, Germany and Spain Source: NPD Group, Retail Tracking Service 2 VTech Holdings Ltd Annual Report 2013

  • Page 5
    ... line of children's digital cameras, will be launched. Beyond the learning aisle, our successful Switch & Go Dinos® and Go! Go! Smart Wheels TM lines will be expanded with more dinos, vehicles and play sets. Products mean services at CMS and innovation in service is how we keep our customer base...

  • Page 6
    ... maintain a lean company structure. Allan Wong Chi Yun Chairman Hong Kong, 15 May 2013 5 Source: NPD Group, Retail Tracking Service. Ranking based on total retail sales in the Infant Toys category for the combined market of UK, France, Germany and Spain 4 VTech Holdings Ltd Annual Report 2013

  • Page 7
    .... Operating profit (US$ million) Operating profit margin (%) Total operating expenses were US$373.1 million, an increase of 3.3% over the last financial year. However, total operating expenses as a percentage of Group revenue fell from 20.3% to 20.1%. VTech Holdings Ltd Annual Report 2013 5

  • Page 8
    ... Review Selling and distribution costs rose by 2.0% from US$255.0 million in the previous financial year to US$260.0 million in the financial year 2013. The increase was mainly attributable to the increased spending on advertising and promotional activities by the Group during the financial year...

  • Page 9
    ... Group's production capacities. As at 31 March 2013 and 2012 All figures are in US$ million unless stated otherwise 2013 276.9 13.9% 90 days 2012 239.2 13.1% 82 days Stocks Average stocks as a percentage of Group revenue Turnover days * Include currency-linked deposits VTech Holdings Ltd Annual...

  • Page 10
    ... trade debtors as a percentage of Group revenue Turnover days Capital Commitments and Contingencies In the financial year 2014, the Group will incur capital expenditure of US$32.8 million for ongoing business operations. All of these capital expenditures will be financed from internal resources...

  • Page 11
    ... products, commercial solid-state lighting and home appliances were also higher, driven by more orders from existing customers. Sales of internet phones for office use, however, were down due to a change in the customer's inventory management policy. Revenue in North America in Last 5 Years...

  • Page 12
    ... customers. In the calendar year 2012, VTech maintained its leadership position as the largest manufacturer of cordless phones in Western Europe 8. Despite lower sales of residential phones, sales of non-residential-phone products continued to rise. These included baby monitors, IADs, connected home...

  • Page 13
    ... growth was mainly driven by higher sales of standalone products in China, Japan and Korea, as VTech continued to make progress in those countries. Shipment to Australia, the Group's largest market for ELPs in Asia Pacific, was slightly down during the financial year 2013. Revenue in Asia Pacific in...

  • Page 14
    ... 12 13 North America Europe Asia Pacific Other Regions NON-RESIDENTIAL-PHONE PRODUCTS Commercial Phones • SMB Phones Others • Hotel Phones • Cordless Headsets and Accessories • IADs • Connected Home Devices • Baby Monitors 12 VTech Holdings Ltd Annual Report 2013 • CareLine

  • Page 15
    ...ODM Business US$37.8 million Year-on-Year Change: +27.7% % of TEL Products Revenue: 5.7% Sales: Branded and ODM Business OUR COMPETITIVE EDGE Market Leadership Product Innovation Technological Know-how 20+ Years of Experience 11 Source: MZA Ltd, 2013 VTech Holdings Ltd Annual Report 2013 13

  • Page 16
    ... Preschool Learning • Grade School Learning • Switch & Go Dinos • Go! Go! Smart Wheels PLATFORM PRODUCTS Hardware Software • Cartridges • InnoTab Family • Apps Accessories • Adaptors, Car Chargers, Headphones... • MobiGo 2 14 VTech Holdings Ltd Annual Report 2013 • V.Reader

  • Page 17
    ... THE LEARNING LODGE Library of over 1,000 download titles in 5 languages, including e-books, learning games, music, videos and creative activities Progress Log enables parents to follow their children's learning progress Easy-to-use download manager VTech Holdings Ltd Annual Report 2013 15

  • Page 18
    ... ELECTRONIC LEARNING PRODUCTS OUR BRANDS ELPs REVENUE 39.3% of Group Revenue PLATFORM PRODUCTS US$ million 800 700 600 500 400 300 200 100 0 09 10 11 12 13 566.9 508.7 594.9 657.1 731.3 North America Europe Asia Pacific Other Regions STANDALONE PRODUCTS 16 VTech Holdings Ltd Annual Report...

  • Page 19
    ... 30+ Years of Experience 12 Source: NPD Group, Retail Tracking Service. Ranking based on total retail sales in the toy categories of infant electronic learning and preschool electronic learning, for the combined market of US, UK, France, Germany and Spain VTech Holdings Ltd Annual Report 2013 17

  • Page 20
    ... AUDIO EQUIPMENT SWITCHING MODE POWER SUPPLIES CMS REVENUE 24.8% of Group Revenue WIRELESS PRODUCTS US$ million 500 421.1 400 390.4 460.3 300 281.3 260.6 SOLID-STATE LIGHTING 200 100 0 09 10 11 12 13 North America Europe Asia Pacific Other Regions 18 VTech Holdings Ltd Annual Report...

  • Page 21
    ... 0.2% Sales: US$42.5 million Year-on-Year Change: -9.6% % of CMS Revenue: 9.2% Sales: OUR COMPETITIVE EDGE Service Excellence Quality Products Strong Reputation Manufacturing Know-how in Specialty Areas 13 Source: Manufacturing Market Insider, March 2013 VTech Holdings Ltd Annual Report 2013...

  • Page 22
    ... a row, VTech won the "Most Supportive Group Award" in the 2013 Standard Chartered Hong Kong Marathon, fielding over 950 participants. The DECT360 Long Range Digital Cordless Combo System won the "Outstanding Innovation & Technology Products - Silver Award" in the category of consumer electronics...

  • Page 23
    ... a medical and health product customer. 15 16 & 17 Source: NPD Group, Retail Tracking Service. Ranking based on total retail sales in the Infant Toys category, for the combined market of UK, France, Germany and Spain Source: NPD Group, Retail Tracking Service VTech Holdings Ltd Annual Report 2013...

  • Page 24
    ... Operating Practices - our efforts to achieve highest levels of product quality and safety standards with good corporate governance practices in place enable VTech to provide high quality and safe products for our customers and create value for our business partners 22 VTech Holdings Ltd Annual...

  • Page 25
    ... reducing the number of components at the product design stage, we are able to eliminate some of the manufacturing processes, resulting in the reduction of chemical use, energy consumption and the associated carbon emissions in our manufacturing operation. VTech Holdings Ltd Annual Report 2013 23

  • Page 26
    ... work closely with our customers to consolidate and combine shipping orders, which helps reduce the frequency of shipments and the associated environmental impacts such as carbon emissions. For our European operations, the logistic hub in Netherlands which is managed by our major logistic services...

  • Page 27
    ... in China. VTech Holdings Ltd Annual Report 2013 WORKPLACE QUALITY VTech cares for its employees and recognises that good staff relations and a motivated workforce play a vital role in the Group's sustainability and operational efficiency. • Employee Numbers and Costs The average number of...

  • Page 28
    ... principles which are clearly stated in our human resources management policies: • Freely Chosen Employment - We do not use forced or prison labour. We ensure that the terms of employment are voluntary. Our employees work at VTech of their own free will and are free to leave the company...

  • Page 29
    ... non-compliance issues and drive for corrective actions in a very timely manner. VTech seriously considers and follows up any quality and safety related issues raised by our consumers from different channels such as call centers, customer response and social network. All the reported cases will be...

  • Page 30
    ..., helping children and the elderly, as well as general corporate philanthropy. Innovation As in previous years, VTech sponsored the Hong Kong Business of Design Week and Hong Kong Awards for Industry in 2012, to encourage innovation in our home region. 28 VTech Holdings Ltd Annual Report 2013

  • Page 31
    ... the lives of children with life-threatening medical conditions through its wish-granting work, by donating US$2 from every phone, baby monitor and qualifying accessory purchase made on certain VTech's websites. Investor Communications In order to enable the shareholders to exercise their rights in...

  • Page 32
    Investor Relations VTech has striven to build long-term relationships with shareholders and investors through active engagement over the last 20 years. We maintain an open dialogue with institutional and retail investors to ensure a full understanding of our corporate strategies, business ...

  • Page 33
    ... raising of concerns by employees. Index Recognition In December 2012, the Company became a constituent stock of two new indexes of stocks listed on The Stock Exchange of Hong Kong Limited: the Hang Seng HK 35 and the Hang Seng High Dividend Yield Index. VTech Holdings Ltd Annual Report 2013 31

  • Page 34
    ... Relations Contact Corporate Communications Department 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 1788 Email: [email protected] Website www.vtech.com/investors/stock-info 32 VTech Holdings...

  • Page 35
    ... Report 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 Corporate Governance Code (the "Code") as set...

  • Page 36
    .... Work performed by the Audit Committee during the financial year included, but not limited to, reviewing the following: - unaudited Group Interim Financial Report for the six months ended 30 September 2012 in the 2012/2013 Interim Report of the Company; 34 VTech Holdings Ltd Annual Report 2013

  • Page 37
    ... employees and attract suitable personnel for continuous development of the Group. The Remuneration Committee held two meetings during the financial year. The Remuneration Committee discussed and reviewed the policy for the remuneration of executive Directors and senior management, and the annual...

  • Page 38
    ... to the extent such information is publicly available by email: [email protected] or by post addressed to the Company's principal office address, Investor Relations contact in the Company's website or through the Company's share registrar. 36 VTech Holdings Ltd Annual Report 2013

  • Page 39
    ... the School of Business of The University of Hong Kong. He is a court and council member of The University of Hong Kong and a court member of the City University of Hong Kong. Mr. WONG also serves on the boards of a number of non-governmental organisations. VTech Holdings Ltd Annual Report 2013 37

  • Page 40
    ... had over 20 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...

  • Page 41
    ...Directors and senior management are set out on pages 37 to 38 of this Annual Report. Principal Activity The principal activity of the Group is design, manufacture and distribution of consumer electronic products. Group Results and Dividends The results of the Group for the year ended 31 March 2013...

  • Page 42
    ... 2011. Under the 2011 Scheme, the Directors may, at their discretion, at any time during 10 years from the date of adoption of the 2011 Scheme, invite employees and officers of any member of the Group to subscribe for shares of the Company in accordance with the terms of the 2011 Scheme. Details of...

  • Page 43
    ...in the 74,101,153 shares of the Company has also been disclosed under the section headed "Directors' Interests and Short Positions in Shares, Underlying Shares and Debentures" in this Annual Report. (2) The capacities of JPMorgan Chase & Co. in holding the 16,297,474 shares (long position) and 1,074...

  • Page 44
    ... Float Based on the information publicly available and within the knowledge of the Directors, 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 31 March 2013 and up to the date of this Annual Report...

  • Page 45
    ...Financial Reporting Standards issued by the International Accounting Standards Board and the disclosure requirements of the Hong Kong Companies Ordinance and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free...

  • Page 46
    ...Director PANG King Fai Director The notes and principal accounting policies on pages 47 to 70 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. 44 VTech Holdings Ltd Annual Report 2013

  • Page 47
    ...Effect of exchange rate changes Decrease in cash and cash equivalents Cash and cash equivalents at 1 April Cash and cash equivalents at 31 March 12 173.6 The notes and principal accounting policies on pages 47 to 70 form part of these financial statements. VTech Holdings Ltd Annual Report 2013 45

  • Page 48
    ... of the current year Shares issued under share option scheme Equity-settled share based payments Shares purchased for Share Purchase Scheme Vesting of shares of Share Purchase Scheme At 31 March 2012 and 1 April 2012 Changes in equity for the year ended 31 March 2013 Comprehensive income Profit...

  • Page 49
    ... the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"). The IASB has issued certain new and revised IFRSs and new interpretations that are first effective for the current accounting period of the Group and the Company. Of these, the following...

  • Page 50
    ... items are translated into United States dollars at the closing foreign exchange rates at the balance sheet date. 48 VTech Holdings Ltd Annual Report 2013 Where parts of a tangible asset have different useful lives, the cost or valuation of the item is allocated on a reasonable basis between the...

  • Page 51
    ... paid to acquire land use 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 (see note (H)). No depreciation or...

  • Page 52
    ...a reliable estimate of the amount of the obligation can be made. The Group recognises the estimated liability on expected return claims with respect to products sold. This provision is calculated based on past experience of the level of repairs and returns. 50 VTech Holdings Ltd Annual Report 2013

  • Page 53
    ... value recognised in prior years is charged/ credited to employee share-based compensation expense in the current year, with a corresponding adjustment to capital reserve. The Group operates a number of defined contribution retirement schemes throughout the world, including Hong Kong, and a defined...

  • Page 54
    ...the financial information provided regularly to the Group's most senior executive management for the purposes of allocating resources to, and performance assessment. Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic...

  • Page 55
    ... the Group's most senior executive management for the purposes of resource allocation and performance assessment, the Group has presented the following reportable segments North America (including the United States and Canada) Europe Asia Pacific Others, which covers sales of electronic products to...

  • Page 56
    ... HO Pak Cho David SUN Tak Kei Michael TIEN Puk Sun Patrick WANG Shui Chung Discretionary bonuses US$ million 1.9 0.6 0.8 - - - - - 3.3 Share-based payments (vi) US$ million 0.7 0.4 0.2 - - - - - 1.3 2012 Total US$ million 3.5 1.5 1.5 - - - - - 6.5 54 VTech Holdings Ltd Annual Report 2013

  • Page 57
    ...-based payments represent the fair value of share options granted to the directors which were charged to the income statement in accordance with the accounting policy set out in Note (S). 4 Taxation 2013 Note US$ million Current tax - Hong Kong - Overseas Over-provision in respect of prior years...

  • Page 58
    ... per share is based on 250.3 million (2012: 249.4 million) ordinary shares which is the weighted average number of ordinary shares in issue during the year after adjusting for shares held for Share Purchase Scheme and the number of dilutive potential ordinary shares under the Company's share option...

  • Page 59
    ...Limited who is an associate member of the Hong Kong Institute of Surveyors with recent experience in the location and category of property being valued. The freehold land and buildings held by the Group for own use was revalued as at 31 March 2013... 24.2 5.5 VTech Holdings Ltd Annual Report 2013 57

  • Page 60
    ... from the operations in the PRC expire 5 years after the relevant accounting year end date. 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 jurisdictions. 58 VTech Holdings Ltd Annual Report 2013

  • Page 61
    ...varying terms of 30 to 90 days. Certain open credit sales are covered by credit insurance or bank guarantees. (b) Impairment of trade debtors Impairment losses in respect of trade debtors are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in...

  • Page 62
    ... 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. 60 VTech Holdings Ltd Annual Report 2013

  • Page 63
    ...'s daily quotation sheet on the date of grant, which must be a business day; and the average closing price of the shares of the Company as stated in the Stock Exchange's daily quotation sheet for five business days immediately preceding the date of grant. VTech Holdings Ltd Annual Report 2013 61

  • Page 64
    ... 0.29% of the issued share capital of the Company. The movements in the number of share options under the 2001 Scheme during the financial year were as follows: Number of share options Date of grant Directors 17 April 2008 17 April 2008 9 April 2010 Employees 9 April 2010 Exercise price HK$41.07 HK...

  • Page 65
    ... is limited to 3% of the issued share capital of the Company from time to time (excluding shares which have already been transferred to employees on vesting). The Share Purchase Scheme shall be valid and effective for a term of 20 years from the Adoption Date. The Awarded Shares will be granted to...

  • Page 66
    ... can continue to provide 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 its capital structure to maintain...

  • Page 67
    ... the year. The Group manages these risks by monitoring credit ratings and limiting the aggregate risk to any individual counterparty. In addition, credit risk is mitigated by the use of credit insurance plans. (b) Currency risk The Group is exposed to foreign currency risk primarily through sales...

  • Page 68
    ... rate changes on its variable rate income-earning financial assets including floating rate deposits and cash. (d) Liquidity risk Cash management of the Company and wholly-owned subsidiaries of the Group are substantially centralised at the Group level. The Group's policy is to regularly monitor...

  • Page 69
    ...over time and between products. There is no maximum royalty payment. The annual minimum royalty payment is determined based on a percentage of the preceding year's earned royalty payment (calculated based on the preceding year's net sales payable). Certain wholly-owned subsidiaries of the Group (the...

  • Page 70
    ...assets of the Group as at 31 March 2013 are set out below: Fully paid issued share capital Percentage of interest held by the Group Name of subsidiary Incorporated/established and operating in Hong Kong: VTech Communications Limited VTech Electronics Limited VTech Telecommunications Limited Perseus...

  • Page 71
    ... the Company has the power to govern the financial and operating policies of the Trust and can derive benefits from the services of the employees who have been awarded shares of the Company under the Shares Purchase Scheme through their continued employment with the Group. 22 Material Related Party...

  • Page 72
    ... to be available for use. The Group reviews annually their estimated useful lives, based on factors that include asset utilisation, internal technical evaluation, technological changes, environmental and anticipated use of the assets tempered by related industry benchmark information. It is possible...

  • Page 73
    ...Taxation Profit for the year Attributable to: Shareholders of the Company Non-controlling interests Profit for the year Basic earnings per share (US cents) ... 211.6 (19.7) 191.9 191.9 - 191.9 77.0 2013 US$ million 1,858.0 226.4 (24.1) 202.3 202.3 - 202.3 80.9 VTech Holdings Ltd Annual Report 2013 71

  • Page 74
    ... Committee Michael TIEN Puk Sun (Chairman) William FUNG Kwok Lun Denis Morgie HO Pak Cho WONG Kai Man Risk Management and Sustainability Committee Allan WONG Chi Yun (Chairman) PANG King Fai Andy LEUNG Hon Kwong WONG Kai Man Company Secretary CHANG Yu Wai 72 VTech Holdings Ltd Annual Report 2013

  • Page 75
    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 76
    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