US demand pushes VTech profit higher

PUBLISHED : Thursday, 24 June, 1999, 12:00am
UPDATED : Friday, 28 October, 2016, 9:17am

VTech Holdings, which makes telephones and electronic educational toys, saw attributable profit jump 18.98 per cent to US$82.1 million for the year to March 31 as a result of strong demand in the United States.

However, profits from continuing operations remained almost unchanged at $86.6 million compared with $86.5 million in the previous 12 months.

Chairman Allan Wong Chi-yun said the profit margin declined last year as turnover of lower-margin cordless telephones out grew higher margin educational toys.

Turnover of telecommunication products rose 29.3 per cent driven by substantial growth of cordless telephones, to account for 58 per cent of the company's $960.6 million turnover.

Turnover of electronic educational toys was up only 2.8 per cent to account for 42 per cent of the group's turnover.

Mr Wong said sales growth of electronic educational toys tapered off last year following fast growth in the past few years.

'It's not surprising to see a slight slowdown. The division still maintains a compound growth rate of 15 per cent annually,' he said.

'We see room for future growth in Europe and the United States.' The telephone division's performance was largely attributed to the company's price-cutting strategy.

'We lowered prices in order to keep out competitors and grow our share in the United States,' Mr Wong said.

However, any price cuts in the future would not squeeze profit margins of cordless telephones as a result of lower material costs, he said.

VTech aimed to spin off the telecommunication product division in 2003 when it was expected to chalk up more than $1 billion in sales, he said.