Vtech Holdings Limited · HKEX:303
Vtech — H1 FY2014 Earnings Presentation
27 slides from Vtech's earnings presentation, Nov 13, 2013
Slide 1: 2013/2014 Interim Results Announcement
VTech Holdings Ltd 2013/2014 Interim Results Announcement 13 November 2013
Slide 2: Shereen Tong, Group Chief Financial Officer
Shereen Tong Group Chief Financial Officer 2
Slide 3: Financial Highlights
Financial Highlights For the six months ended 30 September (US$ M) 2013 2012 Change Revenue 892.4 876.1 1.9% Gross Profit 282.5 266.3 6.1% Gross Profit Margin % 31.7% 30.4% 1.3% pts Operating Profit 105.0 99.0 6.1% Operating Profit Margin % 11.8% 11.3% 0.5% pts Profit Attributable to Shareholders of
Slide 4: Revenue by Region
Revenue by Region For the six months ended 30 September (US$ M) 2013 % 2012 Change North America 455.8 51.1 439.0 3.8% Europe 352.7 39.5 352.0 0.2% Asia Pacific 52.7 5.9 51.0 3.3% Other Regions 31.2 3.5 34.1 -8.5% Total 892.4 100.0 876.1 1.9% 4
Slide 5: Working Capital
Working Capital (US$ M) 30/09/13 31/03/13 30/09/12 Stocks 399.3 276.9 340.0 Stocks Turnover Days 126 days 90 days 111 days Trade Debtors 380.2 224.9 377.3 Trade Debtors Turnover Days 59 days 62 days 61 days 5
Slide 6: Liquidity Position
Liquidity Position (US$ M) 30/09/13 31/03/13 30/09/12 Deposits and Cash 94.7 308.6 108.9 Total Borrowings ‒ ‒ ‒ Net Cash Position 94.7 308.6 108.9 6
Slide 7: King Pang, Group President
vtech King Pang Group President S> > >> >INNOVATION BEYOND TECHNOLOGY 7
Slide 8: Operations Review - Costs
Operations Review - Costs Gross margin improved in 1H: • Labour costs and manufacturing overheads in China continued to rise • Offset by lower cost of materials and success in optimising product design 8
Slide 9: North America
North America • Revenue increased by 3.8% to Revenue by Product Line (US$ million) US$455.8 million, 51.1% of Group TEL 201.5 revenue (+2.1%) • Higher revenue from TEL products and ELPs, while CMS revenue held steady • TEL revenue rose by 2.1% to US$201.5 million Maintained No.1 position in US S
Slide 10: North America (continued)
North America (continued) Revenue by Product Line (US$ million) • ELPs revenue rose by 8.5% to US$157.8 TEL million 201.5 (+2.1%) Driven by higher sales of standalone and platform products Standalone products: Infant products were key driver. Go! Go! Smart Wheels sold strongly Platform product
Slide 11: Europe
Europe Revenue by Product Line (US$ million) • Revenue was up by 0.2% to TEL US$352.7 million, 39.5% of Group 79.2 revenue (-25.3%) • Higher revenues from ELPs and CMS offset by lower revenue from TEL products • TEL revenue decreased by 25.3% to US$79.2 million Market weakness and management’s dec
Slide 12: Europe (continued)
Europe (continued) Revenue by Product Line (US$ million) • ELPs revenue was up by 10.3% to US$141.5 million TEL 79.2 Educational tablets led the growth, along (-25.3%) with Toot-Toot Drivers and Switch and Go Dinos InnoTab range updated in UK with introduction of InnoTab 3 and 3S, while Storio 2
Slide 13: Asia Pacific
Asia Pacific Revenue by Product Line (US$ million) • Revenue increased by 3.3% to US$52.7 million, 5.9% of Group TEL ELPs 19.2 11.9 revenue (+2.7%) (+6.3%) • TEL revenue was up by 2.7% to US$19.2 million, with growth in Australia and China. Sales in Japan returned to normal • ELPs revenue grew by 6.
Slide 14: Other Regions
Other Regions Revenue by Product Line (US$ million) • Revenue declined by 8.5% to US$31.2 million, 3.5% of Group revenue TEL 20.2 (+3.6%) • Other regions include Latin America, Middle East and Africa • TEL revenue increased by 3.6% to US$20.2 million. Growth in Latin America offset sales declines in
Slide 15: Allan Wong, Chairman and Group CEO
Allan Wong Chairman and Group CEO 15
Slide 16: Growth Strategy
vtech | Growth Strategy GROWTH DRIVERS OPERATIONAL EXCELLENCE >> > >> > INNOVATION BEYOND TECHNOLOGY 46
Slide 17: Growth Strategy – Product Innovation
Growth Strategy – Product Innovation New Product Launches in 1H • World’s first home entrance monitoring system, combining a versatile cordless phone with a digital video door bell • Kid Connect, a ground-breaking communication app exclusive to InnoTab 3S • InnoTab 3 and 3S 17
Slide 18: Growth Strategy – Product Innovation
Growth Strategy – Product Innovation New Product Areas • Wireless conferencing system • SIP-based products • Connected home devices 18
Slide 19: Growth Strategy
Growth Strategy Gains in Market Share Geographic Expansion Operational Excellence Operating Cost • World’s No. 1 cordless • AP + Other Regions = • Manage cost closely phone manufacturer 9.4% of Group sales • SG&A: As % of Group • Largest supplier of ELPs • TEL products and ELPs: revenue increased fr
Slide 20: Outlook
vtech Outlook S> > >> >INNOVATION BEYOND TECHNOLOGY 99
Slide 21: Outlook - Overview
Outlook - Overview • Operating environment in VTech’s major markets likely to remain challenging in 2H Pace of recovery in the US appears to be slowing Many European economies face conditions that are still tough and uncertain • Nonetheless, we are optimistic of achieving top-line growth with im
Slide 22: Outlook - Overview
Outlook - Overview • Gross margin is expected to improve YoY Further rise in labour costs and manufacturing overheads will be offset by lower cost of materials • Higher advertising and promotional expenses are planned in 2H to maintain sales in a competitive environment 22
Slide 23: Outlook: TEL products
Outlook TEL products • Sales expected to pick up in 2H • Residential phone business: Sales are improving in Europe and Other Regions Continued growth is expected in North America and Asia Pacific • Non-residential phone business: Continue to expand 23
Slide 24: Outlook: ELPs
Outlook ELPs • Positive momentum expected to carry into 2H • Standalone products: Good sell-through, esp. Go! Go! Smart Wheels and Switch and Go Dinos • Platform products: Sales are expected to hold steady 24
Slide 25: Outlook: CMS
Outlook CMS • Expected to see growth in 2H • More orders from existing customers in professional audio equipment and wireless headsets • Additional business from new customers 25
Slide 26: Conclusion
Conclusion “We have made a solid start to the financial year 2014 and look set to continue on a growth path in the second half of the financial year… …VTech will continue to leverage its strength in product innovation, strong balance sheet, market leadership and operational excellence to bring susta
Slide 27: Thank You
vtech Thank You S> > >> >INNOVATION BEYOND TECHNOLOGY 97