Vtech Holdings Limited · HKEX:303
Vtech — H1 FY2021 Earnings Presentation
38 slides from Vtech's earnings presentation, Nov 9, 2020
Slide 1: 2020/2021 Interim Results Announcement
VTech Holdings Limited 2020/2021 Interim Results Announcement 9 November 2020
Slide 2: Financial Review
vtech Financial Review >> > >> > INNOVATION BEYOND TECHNOLOGY 2
Slide 3: Financial Highlights
Financial Highlights For the six months ended 30 September (US$ million) 2020 2019 Change Revenue 1,123.6 1,124.1 -- Gross Profit 357.0 344.8 3.5% Gross Profit Margin % 31.8% 30.7% 1.1% pts Operating Profit 142.6 134.9 5.7% Operating Profit Margin % 12.7% 12.0% 0.7% pts Profit Attributable to Shareh
Slide 4: Revenue by Region
Revenue by Region For the six months ended 30 September (US$ million) 2020 % 2019 Change North America 492.9 43.9 521.9 -5.6% Europe 487.5 43.4 440.6 10.6% Asia Pacific 130.2 11.6 141.9 -8.2% Other Regions 13.0 1.1 19.7 -34.0% Total 1,123.6 100.0 1,124.1 -- 4
Slide 5: Working Capital
Working Capital (US$ million) 30/09/20 31/03/20 30/09/19 Stocks 436.1 372.6 457.3 Stocks Turnover Days 120 days 102 days 141 days Trade Debtors 521.7 221.5 489.9 Trade Debtors Turnover Days 60 days 63 days 62 days 5
Slide 6: Liquidity Position
Liquidity Position (US$ million) 30/09/20 31/03/20 30/09/19 Deposits and Cash 137.1 242.5 102.5 Total Borrowings ‒ ‒ ‒ Net Cash Position 137.1 242.5 102.5 6
Slide 7: Operations Review
vtech Operations Review >> > >> > INNOVATION BEYOND TECHNOLOGY 7
Slide 8: Overview
Overview • Unprecedented challenges to most of the world’s businesses • Low visibility in May resulting from lockdowns. Retail closures, weak consumer sentiment and business activity slowdown led to pessimistic guidance at annual results • Despite many uncertainties, sales turned out better than exp
Slide 9: Costs
Costs Gross profit margin rose from 30.7% to 31.8% • Lower materials prices • Direct labour costs and manufacturing overheads benefited from weaker RMB • Further productivity gains • More favourable product mix 9
Slide 10: US-China Trade Tensions
US-China Trade Tensions • Phase one trade deal between China and US signed on 15 January 2020 • 15% tariff imposed on residential cordless phones on 1 September 2019 reduced to 7.5% from 14 February 2020 Production started at new facility in Penang to mitigate the impact • Some CMS customers face
Slide 11: COVID-19 Business Update
COVID-19 Business Update • Unprecedented challenges to the Group’s operations • Production and capacity utilisation now back to pre- COVID-19 levels • Consumer demand has recovered strongly in some markets • Rapid growth in e-commerce • Strong financial position • Priority is health and safety of em
Slide 12: North America
North America Revenue by Product Line (US$ million) • Revenue decreased 5.6% to US$492.9 million, 43.9% of Group revenue ELPs 278.1 (+9.8%) • Higher sales of ELPs and TEL products offset by lower CMS sales • ELPs revenue rose by 9.8% to US$278.1 million Higher sales of standalone products, benefit
Slide 13: North America (continued)
North America (continued) Standalone Products: • Growth on higher sales of LeapFrog and VTech brands LeapFrog: Robust sales. Strong sell-through of pre- school items and Blue’s Clues & You! series of licensed products. Sales decline for LeapBuilders VTech: Higher sales of infant and toddler prod
Slide 14: North America (continued)
North America (continued) Platform Products: • Sales declined slightly • LeapFrog: Posted overall growth • Growth in children’s educational tablets and interactive reading systems offset a decline in RockIt Twist; Magic Adventures Globe launched, augmenting growth; LeapFrog Academy growing steadily
Slide 15: North America (continued)
North America (continued) • TEL products revenue increased by 3.7% to US$130.2 million, mainly driven by residential phones • Sales of commercial phones and other telecommunication products held steady • Residential Phones: Sales rose as work-from-home trend led to upgrading and replacement of fix
Slide 16: North America (continued)
North America (continued) • Commercial Phones and Other Telecommunication Products: Stable, though sales of SMB phones, hotel phones, VoIP phones and conference phones decreased as they were hit by slump in business activity and travel Headsets achieved higher sales Baby monitors, CareLine, IA
Slide 17: North America (continued)
North America (continued) • CMS revenue fell 40.9% to US$84.6 million • Declines in all product categories, primarily due to negative impact of the pandemic Professional audio equipment: Significantly impacted by restrictions on public gatherings, with a major customer having excess inventory In
Slide 18: North America (continued)
North America (continued) Medical and health products: Lower orders of hearing aids, as sales activities affected by pandemic Solid-state lighting: Sales decreased as contracts could not be concluded and project-based bidding ceased Communication products: Sales declined as customers phased ou
Slide 19: Europe
Europe Revenue by Product Line (US$ million) • Revenue up 10.6% to US$487.5 million, 43.4% of Group revenue ELPs 157.6 (+8.2%) • Higher sales of ELPs and CMS offset lower TEL products revenue • ELPs revenue up 8.2% to US$157.6 million Higher sales of standalone and platform products Sales increa
Slide 20: Europe (continued)
Europe (continued) Standalone Products: • VTech: Higher sales. Growth in preschool products, KidiZoom camera, other Kidi line products and Switch & Go Dinos offset declines in infant products and Toot-Toot family of products • Toot-Toot Cory Carson rolled out • LeapFrog: Sales increased. Rising sale
Slide 21: Europe (continued)
Europe (continued) Platform Products: • Growth in both VTech and LeapFrog brands • VTech: Main drivers were KidiZoom Smartwatches, Touch & Learn Activity Desk and children’s educational tablets. These offset a decline in KidiCom Max • LeapFrog: Revenue increase driven by Magic Adventures Globe and i
Slide 22: Europe (continued)
Europe (continued) • TEL products revenue decreased by 8.4% to US$52.5 million Lower sales of residential phones, commercial phones and other telecommunication products Residential Phones: Sales on ODM basis to major telephone companies declined as their business activities slowed down 22
Slide 23: Europe (continued)
Europe (continued) • Commercial Phones and Other Telecommunication Products: Higher sales of CAT-iq handsets, CareLine, IADs and headsets insufficient to offset declines in baby monitors, VoIP phones and conference phones CAT-iq handsets, CareLine, IADs and headsets: Benefited from stay-at-home ad
Slide 24: Europe (continued)
Europe (continued) • CMS revenue rose 16.8% to US$277.4 million • Higher sales of hearables, medical and health products, home appliances and communication products offset declines in professional audio equipment, IoT products and switching mode power supplies Hearables: Significant growth boosted
Slide 25: Europe (continued)
Europe (continued) Home appliances: Stable Communication products: Benefited from more orders for Wi-Fi routers Professional audio: Lower sales, as higher demand for audio interface equipment failed to offset lower orders for audio mixers and amplifiers IoT: Sales decreased as pandemic slowe
Slide 26: Asia Pacific
Asia Pacific Revenue by Product Line (US$ million) • Revenue decreased by 8.2% to ELPs US$130.2 million, 11.6% of Group 40.4 (-9.4%) revenue • Lower sales of ELPs and CMS offset higher sales of TEL products • ELPs revenue down 9.4% to US$40.4 million, as growth in Australia offset by decline in main
Slide 27: Asia Pacific (continued)
Asia Pacific (continued) ELPs Australia: Strong sell-through of VTech and LeapFrog branded products Became No. 1 manufacturer in infant and toddler toys category Mainland China: Growth in online sales insufficient to compensate for decline in offline channels 27
Slide 28: Asia Pacific (continued)
Asia Pacific (continued) • TEL products revenue up 15.3% to US$15.8 million on higher sales in Australia, Japan and Hong Kong Australia: Growth mainly driven by baby monitors Japan: Increased orders for residential phones Hong Kong: IADs were key driver 28
Slide 29: Asia Pacific (continued)
Asia Pacific (continued) • CMS revenue down 11.5% to US$74.0 million • Lower sales of medical and health products and home appliances offset growth in professional audio equipment and communication products • Movement control order in Malaysia also affected sales 29
Slide 30: Asia Pacific (continued)
Asia Pacific (continued) • Medical and health products: Sales of diagnostic ultrasound systems fell as budgets shifted to COVID-19 related equipment • Home appliances: Orders fell as product reached end of life-cycle; orders for other products slowed by pandemic • Professional audio: Growth driven b
Slide 31: Other Regions
Other Regions Revenue by Product Line (US$ million) • Revenue down 34.0% to US$13.0 million, ELPs 1.1% of Group revenue 5.9 (-35.2%) • Lower sales of all three product lines • ELPs revenue down 35.2% to US$5.9 million. Higher sales in Africa offset by lower sales in Middle East and Latin America • T
Slide 32: Outlook
Outlook >> = >> > INNOVATION BEYOND TECHNOLOGY 32
Slide 33: Outlook
Outlook Ongoing impact of COVID-19 brings unusually high degree of uncertainty to outlook • Resurgence in infection rates in US and Europe, along with higher unemployment, could weaken consumer sentiment in Group’s key markets • Full year revenue not expected to grow • Gross profit margin to improve
Slide 34: Outlook: ELPs
Outlook ELPs • Full year revenue forecast to be broadly stable • North America: Positive momentum at VTech and LeapFrog brands forecast to continue • Europe: Lockdowns in France, Germany and UK may impact holiday sales • Asia Pacific: Trend in Australia to remain robust; sales in mainland China in 2
Slide 35: Outlook: TEL products
Outlook TEL products • Full year revenue may decline slightly • Residential phone sales to hold steady • Slow recovery for commercial phones • New Snom VoIP line to be rolled out in early 2021 • Good response to latest range of hotel phones • Positive momentum in CAT-iq handsets, CareLine and IADs •
Slide 36: Outlook: CMS
Outlook CMS • Full year revenue expected to increase on strong headset orders and recovery in other product categories • Shenzhen NPI centre: Aims to capture orders from start-ups worldwide, with full operation by end-2020 • CMS facility in Muar: Phase 1 expansion complete, work moving ahead on phas
Slide 37: Q&A
vtech Q&A >> > >> > INNOVATION BEYOND TECHNOLOGY S37/
Slide 38: Thank You
vtech Thank You >> > >> > INNOVATION BEYOND TECHNOLOGY