Vtech Holdings Limited · HKEX:303
Vtech — FY2018 Earnings Presentation
34 slides from Vtech's earnings presentation, May 17, 2018
Slide 1: FY2018 Annual Results Announcement
VTech Holdings Limited FY2018 Annual Results Announcement 17 May 2018 1
Slide 2: Financial Review
vtech Financial Review >> > >> > INNOVATION BEYOND TECHNOLOGY 2
Slide 3: Financial Highlights
Financial Highlights For the year ended 31 March (US$ M) 2018 2017 Changes Revenue 2,130.1 2,079.3 2.4% Gross Profit 702.0 689.4 1.8% Gross Profit Margin % 33.0% 33.2% -0.2% pts Operating Profit 231.3 200.0 15.7% Operating Profit Margin % 10.9% 9.6% 1.3% pts Profit Attributable to Shareholders of th
Slide 4: Revenue by Region
Revenue by Region For the year ended 31 March (US$ M) 2018 % 2017 Change North America 1,041.0 48.9 1,016.2 2.4% Europe 849.1 39.9 867.8 -2.2% Asia Pacific 197.1 9.2 148.6 32.6% Other Regions 42.9 2.0 46.7 -8.1% Total 2,130.1 100.0 2,079.3 2.4% 4
Slide 5: Working Capital
Working Capital (US$ M) 31/03/18 31/03/17 Stocks 349.9 324.9 Stocks Turnover Days 102 days 96 days Trade Debtors 264.9 275.4 Trade Debtors Turnover Days 65 days 64 days 5
Slide 6: Liquidity Position
Liquidity Position (US$ M) 31/03/18 31/03/17 Deposits and Cash 254.4 268.8 Total Borrowings - (1.7) Net Cash Position 254.4 267.1 6
Slide 7: Operations Review
vtech Operations Review >> > >> > INNOVATION BEYOND TECHNOLOGY 7
Slide 8: Costs
Costs • Gross profit margin fell from 33.2% to 33.0% • Mainly due to higher cost of materials, which offset a positive currency impact and productivity gains • Most LeapFrog and Snom products brought in-house for manufacture 8
Slide 9: Toys"R"Us
Toys“R”Us • Retailer filed for bankruptcy protection in the US and Canada in September 2017, followed by liquidation of its US and UK businesses in early 2018 • Resulted in significant reduction of sales to the retailer, affecting growth primarily in North America and Europe • VTech’s sales up to th
Slide 10: North America
North America Revenue by Product Line (US$ million) • Revenue increased 2.4% to US$1,041.0 ELPs million, 48.9% of Group revenue 458.2 (+0.7%) • Higher ELPs and CMS sales offset lower revenue from TEL products • ELPs revenue rose by 0.7% to US$458.2 million − Growth negatively impacted by Toys“R”Us −
Slide 11: North America (continued)
North America (continued) Standalone Products: − Flat sales − LeapFrog: Sales grew on more new product launches, with both infant and preschool products recording higher sales − VTech: Sales decreased, mainly owing to weaker performance of Go! Go! Smart family of products 11
Slide 12: North America (continued)
North America (continued) Platform Products: − Higher sales, driven by VTech platform products − Kidizoom Smartwatch range, KidiBuzz, Touch and Learn Activity Desk Deluxe were growth drivers − LeapFrog platform products sales declined, on lower sales of children’s educational tablets − Sales of Leap
Slide 13: North America (continued)
North America (continued) • TEL products revenue decreased by 10.6% to US$327.0 million • Growth in commercial phones and other telecommunication products unable to offset lower sales of residential phones • Commercial Phones and Other Telecommunication Products: − Growth was driven by higher sales
Slide 14: North America (continued)
North America (continued) − Headsets: Maintained strong sales momentum − VoIP phones: New VTech branded phones were driver − Baby monitors: Sales declined on customer order delay, but VTech branded range gained market share − Hotel phones and conference phones: Steady growth • Residential Phones: −
Slide 15: North America (continued)
North America (continued) • CMS revenue up 30.8% to US$255.8 million − Growth across the board − Professional audio: Significant sales increase on strong demand for new active speakers and more orders as a customer worked through excess inventory 15
Slide 16: North America (continued)
North America (continued) − Solid-state lighting: Sales boosted by an existing customer transferred production to VTech − Industrial products: New orders for PCB assembly for industrial printers, electronic locks and note counting devices − Home appliances: Sales rose as customer expanded market sha
Slide 17: Europe
Europe Revenue by Product Line (US$ million) • Revenue fell by 2.2% to US$849.1 million, 39.9% of Group revenue ELPs 363.2 (+1.6%) • Higher sales of ELPs and TEL products unable to offset lower sales of CMS • ELPs revenue rose by 1.6% to US$363.2 million, despite the negative impact from Toys“R”Us −
Slide 18: Europe (continued)
Europe (continued) Standalone Products: • Achieved slightly higher sales owing to growth in LeapFrog infant and preschool categories • VTech standalone products: Stable sales • Higher sales of infant and preschool products, Kidizoom cameras and the Kidi line compensate for lower sales of Toot-Toot f
Slide 19: Europe (continued)
Europe (continued) Platform Products: • Sales increased • VTech: Higher sales, driven by Kidizoom Smartwatch range and KidiCom MAX • LeapFrog: Sales grew on introduction of updated version of LeapStart/MagiBook, offsetting decline in children’s educational tablets 19
Slide 20: Europe (continued)
Europe (continued) • TEL products revenue increased by 2.9% to US$132.7 million − Higher sales of commercial phones and other telecommunication products offset lower sales of residential phones • Commercial Phones and Other Telecommunication Products: − VoIP phones: Higher sales driven by full-year
Slide 21: Europe (continued)
Europe (continued) − CAT-iq handsets: Sales rose due to increased promotion − Baby monitors and hotel phones: Stable sales • Residential Phones: − Sales declined on continued contraction of fixed-line telephone market 21
Slide 22: Europe (continued)
Europe (continued) • CMS revenue fell by 7.4% to US$353.2 million • Decline mainly due to lower sales of switching mode power supplies − Switching mode power supplies: Ownership change led to production being moved back in-house − Hearables: Lower sales as customers faced keen competition in headset
Slide 23: Europe (continued)
Europe (continued) − Medical and health products: Growth in hearing aids offset by declines in hair removal products − Professional audio: Sales grew as orders from two major customers increased − Industrial products: Continued to benefit from rising sales of smart meters − Communication products: S
Slide 24: Asia Pacific
Asia Pacific Revenue by Product Line (US$ million) • Revenue increased by 32.6% to ELPs US$197.1 million, 9.2% of Group revenue 71.9 (+36.4%) • ELPs revenue up 36.4% to US$71.9 million, led by growth in Australia and mainland China • TEL products revenue increased 16.0% to US$44.2 million. Japan, Ho
Slide 25: Other Regions
Other Regions Revenue by Product Line (US$ million) • Revenue fell by 8.1% to US$42.9 million, ELPs 2.0% of Group revenue 14.0 (+5.3%) • Lower sales of TEL products offset higher sales of ELPs and CMS • ELPs revenue up 5.3% to US$14.0 million. Higher sales in Middle East and Latin America compensate
Slide 26: Outlook
vtech Outlook >> > >> > INNOVATION BEYOND TECHNOLOGY 26
Slide 27: Outlook - Overview
Outlook - Overview • Group revenue expected to rise in FY2019 − TEL products anticipated to return to growth − CMS sales forecast to increase − ELPs revenue difficult to gauge • Gross margin trend difficult to predict • US-China trade conflict: The target list announced of products potentially subje
Slide 28: Outlook
Outlook ELPs • Revenue in FY2019 to be affected by Toys“R”Us liquidation • Longer term prospects remain positive • North America and Europe: Plan to strengthen market position by new product launches • Standalone Products: − Expansion of VTech baby, infant and preschool lines, as well as LeapFrog br
Slide 29: Outlook
Outlook • Platform Products: − Kidizoom Smartwatch DX2 to be rolled out to most European markets − New LeapStart 3D to be launched in US and UK − LeapStart library to expand • Asia Pacific: Growth expected to remain robust 29
Slide 30: Outlook
Outlook TEL products • Forecast to return to growth • Commercial phones and headsets lead the way, driven by new product launches, increased sales channels and geographic expansion − VoIP phones: Latest VTech and Snom phones extremely well-received − Headsets: Good momentum to continue, supported by
Slide 31: Outlook
Outlook − Baby monitors: Continue to drive innovation by introducing relevant new features − CAT-iq handsets: Sales will increase as new products to be launched in Germany. The Group also begins supplying products to a UK telecom operator in 3QFY2019 • Residential phones sales will decline further a
Slide 32: Outlook
Outlook CMS • Poised for further growth • Sales will increase across the board, driven by: − Business expansion of existing customers − VTech’s ability to gain additional business by offering customers more design support 32
Slide 33: Outlook
Outlook • VTech to acquire manufacturing facility in Malaysia from Pioneer Corporation • Agreement signed in April 2018 • Acquisition includes fixed assets and business in manufacturing high performance audio equipment • Strengthens CMS’ leading position as a manufacturer of professional audio equip
Slide 34: Thank You
Thank You >> = >> > INNOVATION BEYOND TECHNOLOGY 34