vtech holdings limited · 2017/2018 interim results announcement 9 november 2017. 2 financial...
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VTech Holdings Limited2017/2018 Interim Results Announcement
9 November 2017
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Financial Review
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Financial Highlights
44.8%79.3114.8Operating Profit
45.1%71.4103.6Profit Attributable to Shareholders
of the Company
45.1%28.441.2Basic Earnings per Share (US cents)
Change2016 2017
5.8%982.91,039.7Revenue
For the six months ended 30 September
6.9%313.8335.4Gross Profit
Interim Dividend per Share (US cents) 17.017.0 -
Gross Profit Margin %
Net Profit Margin %
Operating Profit Margin %
2.7% pts7.3%10.0%
2.9% pts8.1%11.0%
0.4% pts31.9%32.3%
(US$ million)
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Revenue by Region
Total 1,039.7 100.0 982.9 5.8%
25.7Other Regions 2.5 26.0 -1.2%
Europe 39.8 412.6 0.3%413.7
North America 499.7 48.0 474.4 5.3%
Asia Pacific 100.6 9.7 69.9 43.9%
% Change20162017(US$ million)
For the six months ended 30 September
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Working Capital
Stocks 456.9 390.5
Stocks Turnover Days 128 days 110 days
Trade Debtors 423.1
Trade Debtors Turnover Days 64 days 60 days
462.9
30/09/1630/09/17
324.9
96 days
275.4
64 days
31/03/17(US$ million)
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Deposits and Cash 91.3 104.4
30/09/1630/09/17
Liquidity Position
Total Borrowings (1.6) ‒
89.7 104.4
268.8
31/03/17
(1.7)
267.1Net Cash Position
(US$ million)
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Operations Review
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• Gross profit margin improved from 31.9% to 32.3%
• Improvement due to more favourable product mix,
positive currency impact and productivity gains, despite
increased materials prices
• Most of the LeapFrog and Snom products brought in-
house for manufacture
Costs and Operations
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North America
• Revenue increased 5.3% to US$499.7 million,
48.0% of Group revenue
• Higher ELPs and CMS sales offset lower
revenue from TEL products
• ELPs revenue rose by 2.6% to US$192.4 million
Driven by higher sales of standalone and
platform products
Maintained position as no.1 manufacturer of
electronic learning toys from infancy through
toddler and preschool in the US
Revenue growth negatively impacted by
Toys“R”Us bankruptcy protection filing
Revenue by Product Line (US$ million)
ELPs192.4(+2.6%)
TEL166.6(-8.5%)
CMS140.7(+34.4%)
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North America (continued)
Toys“R”Us:
Filed for bankruptcy protection in US and Canada on 18 September 2017
VTech’s sales to the retailer covered by credit insurance up to the date of the filing
Shipments no longer covered after 18 September and so temporarily suspended,
pending negotiation of new terms
Has worked closely with this long-term partner to ensure the right products are
delivered to consumers in the run-up to the holiday season
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North America (continued)
Standalone Products:
Strategy to grow LeapFrog standalone toy business
has seen initial success
Top LeapFrog performers included both new and
classic items
VTech standalone products: Higher sales of preschool
products and the Kidizoom Camera range offset
declines in the infant category and the Go! Go! Smart
family of products
Expanded to outdoor tricycle category with 4-in-1 Stroll
& Grow Tek Trike
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North America (continued)
Platform Products:
Kidizoom Smartwatch a growth driver, with new
DX2 and Star Wars themed versions
Touch & Learn Activity Desk Deluxe and
LeapStart continued to perform well, with
updated LeapStart system introduced in August
A new children’s communication device KidiBuzz
on shelves in US
Sales of children’s educational tablets decreased
in line with overall market decline
Launch of LeapFrog Academy in August
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North America (continued)
• TEL products revenue decreased by 8.5% to
US$166.6 million
• Growth in commercial phones and other
telecommunication products unable to offset
lower sales of residential phones
• Residential Phones:
Sales decline reflected ongoing contraction
of fixed-line telephone market
Maintained leadership position in US
residential phones market
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North America (continued)
Commercial Phones and Other
Telecommunication Products:
• Higher sales of headsets, SMB phones, VoIP
phones and conference phones
Headsets: Popularity of Bluetooth models
designed for professional trucker market
VoIP phones: Snom contribution
Conference phones: New channels
• Hotel phones: Stable sales
• Baby monitors: Slight sales decline as customers
delayed project launches to 2H
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North America (continued)
• CMS revenue up 34.4% to US$140.7 million
Higher sales of professional audio equipment, solid-state
lighting and industrial products offset a decline in
communication products
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North America (continued)
Professional audio: Significant growth on higher
demand of new active speakers and as a
customer increased orders after working through
excess inventory
Solid-state lighting: An existing customer
transferred production of a product line to VTech
Industrial products: Gained orders for PCB
assembly for industrial printers and note counting
devices
Communication products: Sales declined as
client’s product line reached the end of life cycle
Home appliances : Stable sales
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Europe
• Revenue up 0.3% to US$413.7 million,
39.8% of Group revenue
• Higher sales of ELPs and TEL products
offset decline at CMS
• ELPs revenue up 7.8% to US$155.7 million
Growth in both standalone and platform
products
Sales increased in key markets of France,
UK, Germany, Benelux and Spain
Strengthened position as no. 1 infant and
toddler toy manufacturer in France, UK,
Germany, Spain and Belgium
Revenue by Product Line (US$ million)
ELPs155.7(+7.8%)
TEL69.5(+10.3%)
CMS188.5(-8.1%)
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Europe (continued)
Standalone Products:
• Growth driven by higher sales of both VTech and
LeapFrog infant and preschool products,
Kidizoom Camera range, Kidi and Little Love
lines
• Offset lower sales of Toot-Toot family of products
• Award-winning products include:
Kidizoom Flix
Little Love Puppy Pal
GearZooz Roll & Roar Animal Train
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Europe (continued)
Platform Products:
• Growth driven by Kidizoom Smartwatch, DigiGo
and LeapStart
• Second generation Kidizoom Smartwatch DX
continued to perform well
• Growth supported by new Star Wars themed
Kidizoom Smartwatches and KidiCom MAX (the
new version of DigiGo)
• Sales of children’s educational tablets declined
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Europe (continued)
• TEL products revenue increased by 10.3% to
US$69.5 million
Higher sales of commercial phones and other
telecommunication products offset lower sales of
residential phones
• Commercial Phones and Other Telecommunication
Products:
VoIP phones: Main reason for sales increase, as
six months contribution from Snom was
consolidated
Baby monitors: Another growth factor, on good
sell-through and increased orders from existing
and new customers
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Europe (continued)
CAT-iq handsets: More orders from existing
customer and entry to Swiss market for VTech
branded handsets
IADs: Sales increase to existing and new
customers
Hotel phones: Good growth
• Residential Phones:
Sales continued to decline due to further
contraction of fixed-line telephone market
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Europe (continued)
• CMS revenue decreased by 8.1% to
US$188.5 million
• Decline mainly on lower sales of
switching mode power supplies
Switching mode power supplies:
Ownership change led to production
being moved back in-house
Professional audio: Sales retreated
slightly as a product phased out by an
existing customer
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Europe (continued)
Hearables: Lower sales on keen competition in wireless headset
market
Industrial products: Growth supported by smart meters for the UK
market
Medical and health products: Growth on higher orders of hearing aids
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Asia Pacific
• Revenue rose by 43.9% to US$100.6
million, 9.7% of Group revenue
• ELPs revenue up 43.4% to US$35.0 million,
led by growth in mainland China, Australia,
South Korea and Hong Kong
• TEL products revenue rose 30.7% to
US$21.7 million, driven by higher sales in
Japan and Hong Kong
• CMS revenue up 51.9% to US$43.9 million.
Higher sales of medical and health products,
professional audio equipment, hearables and
communication products offset lower sales of
solid-state lighting and home appliances. The
newly acquired high precision metal parts
business added to growth
Revenue by Product Line (US$ million)
ELPs35.0(+43.4%)
TEL21.7(+30.7%)
CMS43.9(+51.9%)
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Other Regions
Revenue by Product Line (US$ million) • Revenue down 1.2% to US$25.7 million, 2.5%
of Group revenue
• Lower sales of TEL products offset higher sales
of ELPs and CMS
• ELPs revenue up 12.8% to US$10.6 million.
Higher sales in Middle East compensated for
lower sales in Latin America and Africa
• TEL products revenue decreased by 10.5% to
US$14.5 million on lower sales in Latin America,
offsetting growth in Middle East and Africa
• CMS revenue was US$0.6 million, as compared
to US$0.4 million in 1HFY17
ELPs10.6(+12.8%)
TEL14.5(-10.5%)
CMS0.6(+50.0%)
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Outlook
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Outlook - Overview
• Group revenue for FY2018 expected to increase
• Sales of TEL products to pick up in 2H
• Good momentum behind CMS to continue
• Sales of ELPs difficult to gauge, as shipments to
Toys“R”Us in 2H are uncertain
• Gross margin trend difficult to predict
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Outlook
ELPs
• Good demand for Group’s ELPs
• Standalone Products:
LeapFrog portfolio strengthened by more new learning toys
VTech infant and toddler products, as well as Kidizoom Camera range,
gaining market share
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Outlook
• Platform Products:
Strong sell-through of Kidizoom Smartwatch,
LeapStart, KidiBuzz and KidiCom MAX
Subscriptions to LeapFrog Academy
expected to grow on more marketing efforts
and more Epic Academy Editions are sold
through
• By Geography:
Asia Pacific continues to outperform on
relaxation of one child policy in mainland
China; broader listings in Australia and South
Korea
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Outlook
TEL products
• Expected to achieve full-year growth
• Sales of commercial phones and other
telecommunication products continue to improve,
offsetting further sales decline of residential
phones
VoIP phones: Two key new Snom phones
have been introduced
Conference phones: Benefit from new
Snom models and additional sales channels
Hotel phones: Will grow as delayed projects
come on stream and a new Boutique range is
launched
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Outlook
Headsets: Strong momentum
expected to continue; two new
models for business market to be
launched
Baby monitors: Growth on increased
retail shelf placement
CAT-iq handsets and IADs: Will
grow on increasing orders from
existing and new customers
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Outlook
CMS
• Solid growth expected for FY2018, despite a
slow EMS market in 1HCY2017
• Growth on increasing orders from existing
customers in professional audio, hearables,
industrial products, solid-state lighting as well
as medical and health products
• Will offset further decline in switching mode
power supplies
• Full year sales contribution from high
precision metal parts business
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Outlook
• Plan to migrate towards “Industry 4.0” to position CMS for further growth
• Will continue to achieve excellence in manufacturing, lowering costs,
increasing productivity and improving time to market for customers
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Thank You
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