Vtech Holdings Limited · HKEX:303
Vtech — H1 FY2018 Earnings Presentation
34 slides from Vtech's earnings presentation, Nov 9, 2017
Slide 1: 2017/2018 Interim Results Announcement
VTech Holdings Limited 2017/2018 Interim Results Announcement 9 November 2017
Slide 2: Financial Review
vtech Financial Review >> > >> >INNOVATION BEYOND TECHNOLOGY 9
Slide 3: Financial Highlights
Financial Highlights For the six months ended 30 September (US$ million) 2017 2016 Change Revenue 1,039.7 982.9 5.8% Gross Profit 335.4 313.8 6.9% Gross Profit Margin % 32.3% 31.9% 0.4% pts Operating Profit 114.8 79.3 44.8% Operating Profit Margin % 11.0% 8.1% 2.9% pts Profit Attributable to Shareho
Slide 4: Revenue by Region
Revenue by Region For the six months ended 30 September (US$ million) 2017 % 2016 Change North America 499.7 48.0 474.4 5.3% Europe 413.7 39.8 412.6 0.3% Asia Pacific 100.6 9.7 69.9 43.9% Other Regions 25.7 2.5 26.0 -1.2% Total 1,039.7 100.0 982.9 5.8% 4
Slide 5: Working Capital
Working Capital (US$ million) 30/09/17 31/03/17 30/09/16 Stocks 456.9 324.9 390.5 Stocks Turnover Days 128 days 96 days 110 days Trade Debtors 462.9 275.4 423.1 Trade Debtors Turnover Days 64 days 64 days 60 days 5
Slide 6: Liquidity Position
Liquidity Position (US$ million) 30/09/17 31/03/17 30/09/16 Deposits and Cash 91.3 268.8 104.4 Total Borrowings (1.6) (1.7) ‒ Net Cash Position 89.7 267.1 104.4 6
Slide 7: Operations Review
vtech Operations Review >> > >> >INNOVATION BEYOND TECHNOLOGY 7
Slide 8: Costs and Operations
Costs and Operations • 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 8
Slide 9: North America
North America Revenue by Product Line (US$ million) • Revenue increased 5.3% to US$499.7 million, 48.0% of Group revenue ELPs 192.4 (+2.6%) • 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 pl
Slide 10: North America (continued)
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
Slide 11: North America (continued)
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 t
Slide 12: North America (continued)
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 Kidi
Slide 13: North America (continued)
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 mar
Slide 14: North America (continued)
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 ch
Slide 15: North America (continued)
North America (continued) • CMS revenue up 34.4% to US$140.7 million Higher sales of professional audio equipment, solid-state lighting and industrial products offset a decline in communication products 15
Slide 16: North America (continued)
North America (continued) Professional audio: Significant growth on higher demand of new active speakers and as a customer increased orders after working through excess inventory Solid-state lighting: An existing customer transferred production of a product line to VTech Industrial products: G
Slide 17: Europe
Europe Revenue by Product Line (US$ million) • Revenue up 0.3% to US$413.7 million, 39.8% of Group revenue ELPs 155.7 (+7.8%) • 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 i
Slide 18: Europe (continued)
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 Pup
Slide 19: Europe (continued)
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 e
Slide 20: Europe (continued)
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, a
Slide 21: Europe (continued)
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 t
Slide 22: Europe (continued)
Europe (continued) • CMS revenue decreased by 8.1% to US$188.5 million • Decline mainly on lower sales of switching mode power supplies Switching mode power supplies: Ownership change led to production being moved back in-house Professional audio: Sales retreated slightly as a product phased out
Slide 23: Europe (continued)
Europe (continued) Hearables: Lower sales on keen competition in wireless headset market Industrial products: Growth supported by smart meters for the UK market Medical and health products: Growth on higher orders of hearing aids 23
Slide 24: Asia Pacific
Asia Pacific Revenue by Product Line (US$ million) • Revenue rose by 43.9% to US$100.6 million, 9.7% of Group revenue ELPs 35.0 (+43.4%) • 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$21.7 mill
Slide 25: Other Regions
Other Regions Revenue by Product Line (US$ million) • Revenue down 1.2% to US$25.7 million, 2.5% ELPs of Group revenue 10.6 (+12.8%) • 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 i
Slide 26: Outlook
vtech Outlook >> > >> >INNOVATION BEYOND TECHNOLOGY 96
Slide 27: Outlook - Overview
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 27
Slide 28: Outlook
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 28
Slide 29: Outlook
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 rela
Slide 30: Outlook
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
Slide 31: Outlook
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 31
Slide 32: Outlook
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 mo
Slide 33: Outlook
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 33
Slide 34: Thank You
vtech Thank You >> > >> > INNOVATION BEYOND TECHNOLOGY 34