Hong Kong — VTech Holdings reported lower revenue and profits for its fiscal year, ended March 31.
Group revenue decreased by 6.7 percent over the previous financial year to $1.45 billion, and profits attributable to shareholders declined by 33.6 percent to $143.2 million.
The decrease in profit was mainly due to lower sales, increased price promotions, and an exchange loss of $27.6 million arising from the group's global operations in the ordinary course of business, as the euro and sterling weakened sharply against the U.S. dollar. Excluding the impact of exchange differences, profit attributable to shareholders decreased by 16.7 percent over the previous financial year, the company said.
"To respond to the sudden change in market conditions, VTech moved swiftly to step up retail-level promotions to stimulate sales. Although margins were affected, it enabled VTech to end the full year with lower inventory than last year. In addition, our balance sheet remains strong, with our net cash position slightly ahead of the previous financial year. Our decisive and aggressive action enabled us to establish a solid financial position from which to move forward," said. Allan Wong, chairman and group CEO of VTech Holdings.
In its telecommunication products (TEL), business revenue for the fiscal year declined 9.8 percent over the previous financial year to $620.7 million. The decline was mainly due to the poor market conditions in the United States, following the onset of problems in the global credit markets.
Sales to North America, where VTech operates a branded business, declined by 19.5 percent to $383.8 million, and it accounted for 61.8 percent of total TEL revenue, the company said. The decline in sales was attributable to slowing demand and a reduction of inventories by retailers in anticipation of an uncertain US economy.
Despite the weak economic conditions, both the VTech and AT&T brands performed well, and the group continued to increase its market share, maintaining the No. 1 position in the U.S. cordless phone market, it said. 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, was introduced in October last year. These products have been well received by the market, although shipments have so far been on a modest scale, VTech said.
In its electronic learning products (ELP), business revenue decreased by 7.9 percent to $566.9 million, the company said. After a solid first half, the financial year witnessed a rapid and severe deterioration of the global economy in the second half. This led to softening of consumer demand and necessitated aggressive retail-level promotions, VTech reported.
Sales to North America dropped 5.7 percent, from $291.1 million, to $274.6 million.
Contract manufacturing services (CMS) sets achieved a fifth consecutive record in its revenue in the financial year 2009 as sales rose by 5.0 percent to $260.6 million. The business accounted for 18 percent of group revenue, against 16 percent in the previous financial year.
The growth in sales was mainly driven by customers in the area of professional audio equipment, switching-mode power supplies and solid-state lighting. Geographically, Europe remained the largest market, despite North America having shown a greater growth momentum. Sales to Europe in the financial year 2009 rose by 4 percent to $118.2 million, while sales to North America increased by 14.1 percent to $114.4 million.