Video Technology Holdings Ltd, VTech, the Hong Kong consumer electronics conglomerate that achieved a listing on the London Stock Exchange last October (CI No 1,770), has reported pre-tax profits down 13% at $25m for the year to March 31 on revenues that rose 41% to $561m. Personal Computers – MS-DOS boxes and Apple II clones […]
Video Technology Holdings Ltd, VTech, the Hong Kong consumer electronics conglomerate that achieved a listing on the London Stock Exchange last October (CI No 1,770), has reported pre-tax profits down 13% at $25m for the year to March 31 on revenues that rose 41% to $561m. Personal Computers – MS-DOS boxes and Apple II clones – accounted for 65% of turnover at $363m, up from $247m, although sales outside the US increased only marginally. The growth in sales in the US largely reflected the inclusion of the first full year’s contribution from distributor Leading Technology Inc, in which the group acquired a controlling interest in September 1990. Although VTech increased its penetration of the mass merchandise market for personal computers in the US, the division incurred substantial losses on such sales in the second half, struggling to achieve a break even trading result for the year. By the third quarter, VTech decided its personal computer distribution strategy in the US was all wrong, and has subsequently merged its two subsidiaries, Leading Technology and Laser, to reduce overheads. The company also decided that the computers division would focus only on higher-end, higher-margin personal computer products. The costs of the restructuring programme set the group back $9.7m which has been taken as a charge above the pre-tax line. Telecommunications Products contributed $69m sales, or 12% of revenues, up from $60m last time. The 22% increase in revenues from the division came mainly from Europe as a result of VTech’s acquisition of 49% of SatFarm GmbH, a German distributor of satellite reception equipment.
Technical difficulties delayed the US launch of the division’s 900MHz microprocessor-based cordless telephone – these problems have now been resolved, the financial benefits expected to show in the current year’s sales figures. Research and development spend on telecommunications products was three times that of the previous year, at $3.9m. VTech’s 50% joint venture with Technophone, now part of the Nokia Oy group, to manufacture cellular mobile phone continued to perform very satisfactorily with increased sales and profits. The group currently produces a limited range of high-technology audio and video products, including video accessories, car amplifiers and digital-analogue processors. Losses on these products have been significantly curtailed and largely arose as a result of research and development spend. VTech is keeping a close eye on trading relations between the US and China, which was recently granted Most Favoured Nation trading status for another year – should this status be dropped in the future, the Hong Kong group will take timely action; later this year the third phase of its manufacturing facility in Dongguan will become operational, providing a further 200,000 square feet of factory space. The board has taken initital steps to obtain a secondary listing in the year for the VTech’s shares on the highly volatile and excitable stock exchange in Hong Kong. The group says it is pleased that its diversification into other products has helped it through a difficult time in the personal computer market and following the restructuring of its US distribution channels, is taking a positive but cautious attitude to the future.