HONG KONG, July 3 /PRNewswire/ --

- Record Revenue and Profit Despite Difficult Economic Conditions

-- Record revenue and profit
    -- Group revenue increased by 6.0% to US$1,552.0 million
    -- Profit attributable to shareholders rose by 17.9% to US$215.7
       million
    -- Net profit margin expanded 1.4% points to 13.9%
    -- Net cash topped US$285.4 million
    -- Final dividend of US51.0 cents per share, total dividend per share
       for the year (exclude a special dividend of US30.0 cents per share
       in the financial year 2007) up 26.0%

VTech Holdings Ltd (HKEx: 303; LSE: VTH; ADR: VTKHY) today announced its
annual results for the year ended 31st March 2008, reporting record revenue
and profit, as net profit margin again expanded.

Revenue for the Group increased by 6.0% over the financial year 2007 to
US$1,552.0 million. Profit attributable to shareholders rose 17.9% to
US$215.7 million. Earnings per share rose 16.7% to US89.4 cents. In light of
the continued increase in profitability, together with the very strong Group
balance sheet, the Board of Directors has proposed a final dividend of US51.0
cents per share. Together with the interim dividend of US12.0 cents per
share, this gives a total dividend for the year of US63.0 cents per share.
Excluding a special dividend of US30.0 cents per share in the financial year
2007, the total dividend per share for the financial year 2008 increases
26.0% over the previous financial year.

"Despite challenging economic conditions, VTech reported record revenue
and profit and we were able to expand net profit margin for a third
consecutive year. The solid result reflects the success of our strategy, with
its focus on the four key areas of product innovation, gains in market share,
geographic expansion and operational excellence," said Mr. Allan Wong,
Chairman and Group CEO of VTech Holdings Limited.

Margin Improves Further

While rising costs posed a challenge to all manufacturers during the
financial year 2008, VTech continued to build on its track record of
achieving margin improvement, based on its know-how in R&D and manufacturing.
The Group leveraged its economies of scale, re-engineered products and
increased productivity through better utilisation of manufacturing capacity.
At the same time, stringent quality control ensured that products met
customer expectations, helping to raise sales.

Telecommunication Products (TEL) Business Strengthens Position

Revenue at the TEL business rose 4.1% over the previous financial year to
US$688.0 million and the business accounted for 44.3% of Group revenue. In
contrast to the financial year 2007, growth was mainly driven by increased
sales to Europe, Asia Pacific and emerging markets, where VTech mainly
operates an Original Design Manufacturing (ODM) business.

Sales to Europe grew by 42.9% to US$180.3 million, mainly buoyed by
increasing sales to existing customers as the business delivered more price
competitive products through its new technology platform. Sales to the Asia
Pacific and emerging markets also rose by 126.1% and 32.3% respectively, with
notable sales growth from Australia, Brazil and India.

Adding to the ODM business, in December 2007, the Group entered into a
joint venture with Funkwerk Enterprise Communications GmbH (FEC), a leading
supplier of network and communications solutions based in Germany. FEC will
provide expertise and software for the development of integrated access
devices, with VTech responsible for hardware design and manufacturing. The
first shipment is expected in the final quarter of the financial year 2009.

Sales to North America, where VTech operates a branded business using the
VTech and AT&T brands, declined by 7.3% to US$476.8 million. Although sales
to Canada increased markedly, this could not offset the decline in the United
States where customers reduced inventory in anticipation of an economic
slowdown. VTech nonetheless continued to outperform the competition in the
United States and gain market share.

Strengthening its leadership position, on the technology side, VTech
added to its track record of industry "firsts" by introducing a cordless
phone with instant messaging capability. The new AT&T DECT 6.0 series,
meanwhile, brought to the market phones that deliver the best range and voice
clarity using a proprietary antenna technology.

In cutting edge design, the popular V.Mix range allows users to customise
handsets with their own graphics. The new V.Style series also created a new
trend and standard of high-end industrial design cordless telephones in
stores.

Traditional Electronic Learning Products (ELP) Boost Sales

The ELP business achieved a record performance for the third consecutive
year, with revenue increasing by 8.0% to US$615.7 million, equivalent to
39.7% of total Group revenue, as innovative products supported by increased
shelf space boosted growth. In Europe, revenue increased by 13.5% to US$296.1
million, as VTech maintained its long-established leadership in its principal
markets. Sales in North America also posted gains, rising 3.5% to US$291.1
million. Traditional ELPs led the way, with good sales across the board,
although sales of the award-winning Whiz Kid PC Learning System(TM) were not
up to expectation.

The maturing of the basic V.Smile platform led to an easing off in sales
of both consoles and cartridges. Consequently, contribution of the V.Smile
range to total ELP sales declined to 40.7%, compared to 51.0% in the previous
financial year. Nonetheless, the V.Smile console and cartridges continued to
be the top selling platform items in the electronic preschool category in the
United Kingdom, France and Germany in the calendar year 2007.

To augment the basic console, three new members of the V.Smile family
have been launched in the calendar year 2008. The new V-Motion(TM) console
combines educational video gaming with a wireless motion-activated
controller. Together with the associated game titles, it creates an
interactive gaming experience that engages both minds and bodies. The new
Cyber Pocket(TM) joins the existing V.Smile Pocket(TM) in the Group's
offering of handheld educational gaming systems. To complete the line-up, PC
Pal(TM) is an interactive TV educational game console equipped with a
wireless keyboard, a mouse and a writing pad, teaching young children basic
computer skills such as typing and mouse manipulation.

Both V-Motion and Cyber Pocket include V.Link(TM), a USB drive that
connects children to VTech's secure online site to unlock bonus games and
track their learning progress. These new V.Smile products are also compatible
with the entire existing V.Smile Smartridge library, which, in the calendar
year 2008 will be joined by eight new titles.

In addition to the strengthened V.Smile family, major product launches in
the calendar year 2008 also include the KidiCreative(TM) line and
Create-A-Story (TM). KidiCreative is a line of products that offer high tech
creative play for children. It includes the award-winning Kidizoom
Camera(TM), KidiArt Studio(TM), KidiJamz Studio(TM) music keyboard and
KidiDoodle(TM) game pad. Create-A-Story is a TV connected interactive reading
system that lets children create their own animated stories involving their
favourite Disney characters.

Record Performance at Contract Manufacturing Services (CMS)

The CMS business achieved a fourth consecutive record, with revenue for
the financial year 2008 increasing by 6.5% to US$248.3 million, accounting
for 16.0% of Group revenue. The growth was driven by new customers in
professional audio equipment and radio frequency products.

VTech continued to build its reputation in the Electronic Manufacturing
Services industry and is increasingly winning business through word-of-mouth
recommendation. This is especially true for professional audio equipment,
which accordingly became the largest product category, accounting for 26.8%
of total CMS revenue, followed by switching mode power supplies at 25.4%,
home appliances at 13.0% and wireless products at 13.0%.

While North America raised its share of total CMS revenue to 40.4%,
Europe remained the largest market at 45.7%, followed by Asia Pacific at
13.9%. Good progress was made in developing Japanese customers, who have been
impressed by the new dedicated facility.

The quality of the service VTech offers was again evidenced by a number
of supplier awards. Despite continued cost pressures, the CMS business has
been able to mitigate the impact of cost increases through economies of scale
and leveraging the procurement power of the Group. The business was also able
to pass on some cost increases to customers.

Outlook

"It is prudent not to foresee growth for the financial year 2009, as
economic conditions in our markets, especially the United States, are
worsening. In addition, cost pressures will continue owing to the high oil
price, rising labour costs and inflation in mainland China. Nevertheless, we
remain positive about our future. Our track record in product innovation,
dominant position in many markets, strong balance sheet and operational
excellence should allow us to strengthen our competitive position. We will
continue to manage costs closely and focus on our four strategic drivers for
expansion," said Mr. Wong.

In the TEL business, the ODM business is expected to grow, as competition
weakens and VTech continues to develop emerging markets. The joint venture
with FEC will start to contribute to sales in the final quarter of the
financial year.

Although the branded business will be affected by the slowing US economy,
new product categories that will bring incremental sales are to be launched.
These include AT&T office headsets and a new range of enterprise phones for
medium sized businesses.

For the ELP business, market conditions will be challenging. Not only is
the US economy slowing, but competition is increasing, while the benefit the
Group has reaped from an appreciating Euro is unlikely to continue.

Nonetheless, the global toy business has historically performed
relatively well during economic downturns. We also have a sound strategy that
should allow us to grow the business. Continued innovation in products
remains at the core of this strategy and this will help rejuvenate the
V.Smile range. V-Motion, an interactive educational gaming system that
engages both minds and bodies, is already on the shelves. It will be joined
by Cyber Pocket, a new handheld version to complement the V.Smile Pocket.
Both of these products feature USB connectivity, offering more value to
consumers.

Following the success of V.Smile, which brought a new dimension to the
ELP business, the Group is working to create other new categories that can
become major growth drivers. One of the new product lines to be launched
during the financial year 2009 is the KidiCreative line, which offers high
tech creative play for children.

The prospects for the CMS business looks promising and further sales
increases from both existing and new customers are anticipated. The business
will continue to focus on medium sized customers and maintain our edge in
quality and cost. In mid 2007, the CMS business set up a six sigma team to
improve operational efficiency and this is beginning to yield results. Work
processes are being streamlined and automation increased in order to reduce
the dependence on labour, raise productivity and improve product quality. The
business is also consolidating the supplier base and strengthening
relationships with fewer suppliers to ensure it achieves the most favourable
pricing.

"We should not underestimate the challenges that lie ahead, but with
leadership in our markets, a strong balance sheet and a highly efficient
manufacturing capability, VTech should benefit in the longer term from the
industry consolidation that will ensue," concluded Mr. Wong.

About VTech

VTech is one of the world's largest suppliers of corded and cordless
telephones and electronic learning products. It also provides highly
sought-after contract manufacturing services. Founded in 1976, the Group's
mission is to be the most cost effective designer and manufacturer of
innovative, high quality consumer electronics products and to distribute them
to markets worldwide in the most efficient manner.

Note: Starting from 21:30, 3rd July 2008 (HK time), the video archive of
the FY2008 annual results announcement can be accessed through VTech's
homepage http://www.vtech.com in the "Webcasting and Presentation" section
under "Investor Relations".

For further information, please contact:

Grace Pang
    VTech Holdings Ltd
    Tel: +852-2680-1000
    Fax: +852-2680-1788
    Email: grace_pang@vtech.com

    VTech representatives in Hong Kong
    Gloria Chiu, GolinHarris
    Tel: +852-2501-7970
    Fax: +852-2810-4780
    Email: gloria.chiu@golinharris.com

    VTech representative in the US
    Meredith Klein, GolinHarris
    Tel: +1-212-373-6022
    Fax: +1-212-373-6001
    Email: mklein@golinharris.com



Web site: http://www.vtech.com