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VTech Holdings Limited2015/2016 Interim Results Announcement
12 November 2015
2
Financial Review
2
3
Financial Highlights
-1.9%113.2111.0Operating Profit
-2.5%102.7100.1Profit Attributable to Shareholders
of the Company
-2.4%40.939.9Basic Earnings per Share (US cents)
Change2014 2015
3.0%900.8928.1Revenue
For the six months ended 30 September
-1.4%290.2286.0Gross Profit
Interim Dividend per Share (US cents) 17.017.0 -
Gross Profit Margin %
Net Profit Margin %
Operating Profit Margin %
-0.6% pts11.4%10.8.%
-0.6% pts12.6%12.0%
-1.4% pts32.2%30.8%
(US$ million)
4
Revenue by Region
Total 928.1 100.0 900.8 3.0%
33.1Other Regions 3.6 28.7 15.3%
Europe 40.3 359.9 3.8%373.7
North America 461.6 49.7 450.6 2.4%
Asia Pacific 59.7 6.4 61.6 -3.1%
% Change20142015(US$ million)
For the six months ended 30 September
5
Working Capital
Stocks 367.9 357.4
Stocks Turnover Days 115 days 114 days
Trade Debtors 387.4
Trade Debtors Turnover Days 61 days 59 days
395.5
30/09/1430/09/15
290.2
96 days
221.9
57 days
31/03/15(US$ million)
6
Deposits and Cash 104.9 106.4
30/09/1430/09/15
Liquidity Position
Total Borrowings ‒ ‒
104.9 106.4
294.2
31/03/15
‒
294.2Net Cash Position
(US$ million)
7
Operations Review
7
8
• Cost of materials rose on a change in product mix
• Higher manufacturing overhead due to wage inflation
and increased manufacturing capacity
• Stable direct labour cost on reduced workforce through
automation and process improvement
• Gross margin declined due to depreciation of currencies,
the change in product mix and the higher manufacturing
overhead
Operations Review - Costs
9
North America
• Revenue up 2.4% to US$461.6 million, 49.7% of
Group revenue
• Higher sales of ELPs and CMS offset lower
sales of TEL products
• ELPs revenue rose by 5.3% to US$148.7 million
Higher sales of standalone products offset
lower sales of platform products
Retained no. 1 position in Infant and Preschool
Electronic Learning in the US
Standalone: Growth driven by infant products,
Go! Go! Smart Wheels and Animals; supported
by new Kidizoom Action Cam, Go! Go! Smart
Friends, Baby Amaze and Flipsies
Platform: Higher sales of Kidizoom
Smartwatch line unable to compensate for
lower InnoTab sales
Revenue by Product Line (US$ million)
ELPs148.7(+5.3%)
TEL200.2(-7.0%)
CMS112.7(+19.8%)
10
North America (continued)
• TEL products revenue decreased by 7.0%
to US$200.2 million
Lower sales of residential phones on
market contraction
Strengthened no. 1 position in US
residential phone market
Sales of commercial phones and other
telecommunication products continued to
rise
Baby monitors, four-line small business
phone system, ErisStation and
ErisTerminal saw sales increase
Revenue by Product Line (US$ million)
ELPs148.7(+5.3%)
TEL200.2(-7.0%)
CMS112.7(+19.8%)
11
North America (continued)
• CMS revenue up 19.8% to US$112.7 million
Higher sales of professional audio
equipment and industrial products offset
lower sales of solid-state lighting
Professional audio: Good growth due to
increased order from a major client,
higher demand for customers’ products
and the addition of new customers
Industrial products: Higher sales
because of supplier consolidation by a
customer
Solid-state lighting: Sales decreased
owing to lower demand for the customers’
products
Revenue by Product Line (US$ million)
ELPs148.7(+5.3%)
TEL200.2(-7.0%)
CMS112.7(+19.8%)
1212
Europe
• Revenue up 3.8% to US$373.7 million, 40.3% of
Group revenue
• Growth mainly driven by higher CMS sales
• ELPs revenue down 8.7% to US$129.2 million
Sales decline due to depreciation of European
currencies and lower sales of platform products
Strengthened position as the no. 1 infant toy
manufacturer
Platform: Lower sales of InnoTab/Storio offset
higher sales of Kidizoom Smartwatch
Standalone: Flat sales. Toot-Toot Drivers, Animals
and Little Love recorded growth, offsetting the
declines in Switch & Go Dinos, infant and
preschool products. Kidizoom Action Cam and
Flipsies generated incremental sales
Revenue by Product Line (US$ million)
ELPs129.2(-8.7%)
TEL74.4(-4.1%)
CMS170.1(+20.8%)
1313
Europe (continued)
• TEL products revenue declined by 4.1% to
US$74.4 million
Lower sales of residential phones on
market contraction
Sales of commercial phones and other
telecommunication products rose
significantly, despite weak Euro impacted
our customers
Commercial phones:
Sales increase in CAT-iq handsets,
ErisStation and ErisTerminal
Other telecommunication products:
Baby monitors and IADs registered
growth
Revenue by Product Line (US$ million)
ELPs129.2(-8.7%)
TEL74.4(-4.1%)
CMS170.1(+20.8%)
1414
Europe (continued)
• CMS revenue rose by 20.8% to US$170.1
million
Sales of hearables, professional audio
equipment and home appliances grew,
while sales of power supplies remained
stable
Hearables: Higher sales due to revenue
share gain with a major customer,
alongside strong market demand for the
customer’s products
Professional audio: Sales increased as
the Group secured more projects and on
sales contribution from new customers
Home appliances: Sales to existing
customers increased
Revenue by Product Line (US$ million)
ELPs129.2(-8.7%)
TEL74.4(-4.1%)
CMS170.1(+20.8%)
151515
Asia Pacific
• Revenue decreased by 3.1% to US$59.7 million,
6.4% of Group revenue
• Lower sales of TEL products and CMS offset
growth in ELPs
• ELPs revenue up 63.0% to US$20.7 million, driven
by growth in mainland China, Japan and Australia
• TEL products revenue decreased by 26.0% to
US$16.5 million. Lower sales in Australia, Japan
and mainland China offset growth in Taiwan, India
and Hong Kong
• CMS revenue down 15.4% to US$22.5 million.
Lower sales of testing and measurement
equipment, solid-state lighting and medical and
health products offset higher sales of home
appliances and hearables
Revenue by Product Line (US$ million)
ELPs20.7(+63.0%)
TEL16.5(-26.0%)
CMS22.5(-15.4%)
1616
Other Regions
• Revenue up 15.3% to US$33.1 million,
3.6% of Group revenue
• Other Regions comprise Latin America, the
Middle East and Africa
• ELPs revenue fell by 12.0% to US$8.8
million. Growth in the Middle East was offset
by lower sales in Africa and Latin America
• TEL products revenue posted 28.8% growth
to US$23.7 million, driven by higher sales in
the Middle East and Africa
• CMS revenue was US$0.6 million, as
compared to US$0.3 million in 1HFY15
Revenue by Product Line (US$ million)
ELPs8.8(-12.0%)
TEL23.7(+28.8%)
CMS0.6(+100.0%)
1717
VTech Strategy
17
18
Growth Strategy
19
Product Innovation - ELPs
• Expanded Go! Go! Smart Family
• Began to sell Go! Go! Smart
Friends in US
GO! GO! SMART FAMILY
• Global launch
KIDIZOOM ACTION CAM
• Rolled out to US and Europe
• Enable VTech to enter the girl
aisle
FLIPSIES
• Launched 100+ new products
globally
CORE LEARNING
• US launch of Baby Amaze
• Line extension of Little Love in
Europe
BABY AMAZE/LITTLE LOVE
20
TV game consoleHandheldWearables
Product Innovation - ELPs
Conference
Phones
SIP Phones
Baby
monitors
21
4 wireless mics 2 wireless mics SIP version
3 SIP lines 5 SIP lines 2 SIP lines
Product Innovation – TEL products
Commercial
phones
Baby
monitors
22
New wireless monitoring system
to hit the US and some AP
markets in 2HFY16
Product Innovation – TEL products
2323
Product Innovation – TEL products
Residential Phones – Continue to launch feature-rich products with superior design
24
Product Innovation – CMS
Competency
Flexible
Service
DFM
Manufacturing
Know-how
Strong
Reputation
VTech CMS continued to
outperform the global EMS
industry
2525
Growth Drivers
Operational Excellence
• Automation
• Process improvement
• Product optimisation for manufacturing
Reduce workforce further while increasing output
Geographic Expansion
• Australia
• China
• Japan
• Korea
• Selected markets in
Latin America and the
Middle East
Market Share Gain
Global no. 1 cordless phone
manufacturer
Global no. 1 player in ELPs
World’s top 50 EMS provider
26
Outlook
26
27
Outlook - Overview
• Expects stable revenue and lower gross
margin year-on-year, given the Group’s
year-to-date financial results and the
continued strong headwinds from currency
movements
28
Outlook
ELPs
Revenue to be slightly lower year-on-year
• Platform products sales to decline, but
innovative new products to stabilise the
business:
Kidizoom Smartwatch DX
DigiGo multi-function handheld device
InnoTV educational gaming system
29
Outlook
ELPs
• Standalone products to achieve
further growth:
Good sell-through for infant
products, Go! Go! Smart Family
Incremental sales from Kidizoom
Action Cam, Flipsies, Baby
Amaze
30
Outlook
TEL products
Revenue to improve over 1H
• Residential phones sales to remain slow
worldwide
• Commercial phones and other
telecommunication products to grow:
ErisStation, ErisTerminal, four-line small
business phone system, CAT-iq
handsets
Baby monitors, IADs, wireless
monitoring system
31
Outlook
CMS
Good momentum to continue
• Professional audio, hearables, home
appliances to grow on orders from existing and
new customers
• Switching mode power supplies business to
remain stable
• Sales of solid-state lighting expected to decline
• New manufacturing building commenced
operations in July 2015, adding 25% to
production capacity
32
Conclusion
“It has been a steady start to the financial year 2016…
VTech will continue to focus on product innovation,
increasing market share, expanding geographically and
pursuing operational excellence to enhance
shareholder value.”
3333
Thank You
33
