VTech, one of the world's leading manufacturers and designers of consumer telecom products, reported a 20.5 percent drop in half-year net profits on exchange loss, though its revenue maintained a slight growth.

The firm earned $68.8 million for the six months ended Sept 30, 2008, a decrease of $17.7 million from last year due to an exchange loss of $11.2 million as the euro and sterling depreciated against the dollar in the period.

Apart from an exchange loss, the company also recorded a slight decline in revenue of its telecommunication products (TEL) business.

It was down by 2.8 percent to $346.2 million from last year due to sales decline in North America.

However, the overall revenue for the period reached $778.5 million, which was an increase of $44.4 million or 6 percent in the same period a year earlier.

This was mainly due to higher sales at the electronic learning products (ELP) and contract manufacturing services (CMS).

The ELP business continued to grow and it had increased 10.7 percent to $290.1 million compared with the previous year.

The growth was mainly driven by the increased sales in standalone products, particularly in the infant category.

Driven by a strong demand in particular switching power supply, home appliances and wireless products from major customers, the CMS business also saw its revenue increase by 22.7 percent to $142.2 million.

"In the TEL business, we expect continued weakness at the branded business, since sales of cordless phones will be affected by the slowing US economy," the statement said.

Going forward, VTech expects sales this Christmas to be the slowest in recent years and the poor economic conditions to continue throughout 2009 at least.

With the US and European markets sinking into recession and rising unemployment, there will be substantial reduction in consumer spending.

Chairman Alan Wong told reporters yesterday that the revenue is likely to contract in the second half of the fiscal year, but he expects the sales for the whole year to remain stable.

Wong noted that the firm will neither lay off any staff nor cut their salary.

The firm has adequate cash flow and a planned capital expenditure of $30 million this fiscal year.

(HK Edition 11/20/2008 page2)