Vtech Holdings Limited · HKEX:303
Vtech — FY2019 Earnings Presentation
38 slides from Vtech's earnings presentation, May 20, 2019
Slide 1: FY2019 Annual Results Announcement
VTech Holdings Limited FY2019 Annual Results Announcement 20 May 2019 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) 2019 2018 Change Revenue 2,161.9 2,130.1 1.5% Gross Profit 636.4 702.0 -9.3% Gross Profit Margin % 29.4% 33.0% -3.6% pts Operating Profit 193.2 231.3 -16.5% Operating Profit Margin % 8.9% 10.9% -2.0% pts Profit Attributable to Shareholders of
Slide 4: Revenue by Region
Revenue by Region For the year ended 31 March (US$ M) 2019 % 2018 Change North America 994.5 46.0 1,041.0 -4.5% Europe 882.9 40.8 849.1 4.0% Asia Pacific 248.6 11.5 197.1 26.1% Other Regions 35.9 1.7 42.9 -16.3% Total 2,161.9 100.0 2,130.1 1.5% 4
Slide 5: Working Capital
Working Capital (US$ M) 31/03/19 31/03/18 Stocks 369.9 349.9 Stocks Turnover Days 100 days 102 days Trade Debtors 263.0 264.9 Trade Debtors Turnover Days 65 days 65 days 5
Slide 6: Liquidity Position
Liquidity Position (US$ M) 31/03/19 31/03/18 Deposits and Cash 237.0 254.4 Total Borrowings - - Net Cash Position 237.0 254.4 6
Slide 7: Operations Review
vtech Operations Review >> > >> > INNOVATION BEYOND TECHNOLOGY 7
Slide 8: Costs
Costs • Gross profit margin fell from 33.0% to 29.4% Higher materials prices, in part from tight supply of certain components Product mix Rise in direct labour costs and manufacturing overheads 8
Slide 9: US-China Trade Tension
US-China Trade Tension • In FY2019, US$250 billion of goods from China to the US subjected to additional tariffs of 10%-25% • Tariffs on US$200 billion of Chinese imports raised to 25% on 10 May 2019 • Negotiations continue between the two countries • VTech ELPs and TEL products not subject to such
Slide 10: North America
North America Revenue by Product Line (US$ million) • Revenue decreased 4.5% to US$994.5 ELPs million, 46.0% of Group revenue 476.6 (+4.0%) • Higher ELPs sales unable to offset lower revenues of TEL products and CMS • ELPs revenue rose by 4.0% to US$476.6 million Growth despite Toys“R”Us closure,
Slide 11: North America (continued)
North America (continued) • Standalone Products: Sales up on growth in VTech and LeapFrog brands LeapFrog: Strong growth on strategy to expand the standalone toy business by new product launches VTech: Higher sales of preschool products offset decline in Go! Go! Smart family of products 11
Slide 12: North America (continued)
North America (continued) • Platform Products: Sales decreased VTech: Sales increased on strong sell- through of Kidizoom Smartwatch DX2 and KidiBuzz LeapFrog: Higher sales of LeapFrog reading systems insufficient to offset lower sales of children’s educational tablets Steady growth for Leap
Slide 13: North America (continued)
North America (continued) • TEL products revenue decreased by 19.4% to US$263.4 million • Residential Phones: Decline of fixed-line telephone market Keen competition and supplier consolidation by retailers led to loss of shelf space in club and consumer electronics channels Maintained leadersh
Slide 14: North America (continued)
North America (continued) • Commercial Phones and Other Telecommunication Products: ̶ Higher sales of headsets and hotel phones insufficient to offset lower sales of VoIP phones, baby monitors and wireless monitoring systems ̶ Headsets: Benefited from launch and strong sell-through of world’s first
Slide 15: North America (continued)
North America (continued) • Commercial Phones and Other Telecommunication Products: ̶ VoIP phones: Lower sales due to product delay ̶ Baby monitors: Overall sales decline on lower orders from a customer ̶ Wireless monitoring systems: Lower sales of Wi-Fi IP cameras 15
Slide 16: North America (continued)
North America (continued) • CMS revenue down 0.5% to US$254.5 million • Higher sales of industrial products and medical and health products offset by lower sales of solid-state lighting and communication products • Sales of professional audio equipment stable 16
Slide 17: North America (continued)
North America (continued) Industrial products: Increased orders for PCB assembly for note counting devices and industrial printers Medical and health products: Sales rose on more orders for hearing aids Solid-state lighting: Affected by keen competition faced by customers Communication produ
Slide 18: Europe
Europe Revenue by Product Line (US$ million) • Revenue up 4.0% to US$882.9 million, 40.8% of Group revenue ELPs 343.5 (-5.4%) • Higher sales of CMS offset lower ELPs and TEL products revenues • ELPs revenue down 5.4% to US$343.5 million Sales lower in all markets, on tough market conditions Toys
Slide 19: Europe (continued)
Europe (continued) • Standalone Products: VTech: Sales decreased on tough market conditions and logistics issues LeapFrog: Stable sales Launch of LeapBuilders/BlaBla Blocks Marks expansion into building set category 19
Slide 20: Europe (continued)
Europe (continued) • Platform Products: Sales lower for both brands VTech: Higher sales of Kidizoom Smartwatches, augmented by updated Touch and Learn Activity Desk LeapFrog: Continued growth in LeapFrog reading systems supported by launch of LeapStart 3D in UK These gains insufficient to of
Slide 21: Europe (continued)
Europe (continued) • TEL products revenue decreased by 9.8% to US$119.7 million Sales of residential phones, commercial phones and other telecommunication products decreased • Residential Phones: Sales declined as fixed-line telephone market contracted further 21
Slide 22: Europe (continued)
Europe (continued) • Commercial Phones and Other Telecommunication Products: VoIP phones: Continued to expand, with positive reception for new Snom products Hotel phones: Stable sales Baby monitors: Lower sales on order reduction by a major customer CAT-iq handsets: Sales decline on lower sa
Slide 23: Europe (continued)
Europe (continued) • CMS revenue up 18.8% to US$419.7 million • Growth across the board Hearables: Strong growth on market share gains, plus new product launches and good sell through of products Professional audio: Boosted by increased orders 23
Slide 24: Europe (continued)
Europe (continued) Industrial products: More orders for internet-connected smart thermostats and air-conditioning controls, new smart meters in UK Home appliances: Increased demand for electric ovens in Italy, market share gains by a major customer in Russia Communication products: More orders
Slide 25: Asia Pacific
Asia Pacific Revenue by Product Line (US$ million) • Revenue rose by 26.1% to US$248.6 ELPs million, 11.5% of Group revenue 81.2 (+12.9%) • Higher sales of ELPs and CMS offset lower sales of TEL products • ELPs revenue up 12.9% to US$81.2 million • Led by continued growth in mainland China and Austr
Slide 26: Asia Pacific (continued)
Asia Pacific (continued) • Mainland China: Growth driven by higher sales of infant and toddler products, new product launches and channel expansion New KidiSchool line, targeting early education segment, especially well received Higher penetration among maternity-infant- child specialty retailer
Slide 27: Asia Pacific (continued)
Asia Pacific (continued) • TEL products revenue fell 19.9% to US$35.4 million, as lower sales in Japan, Australia, Hong Kong offset growth in Malaysia Japan: Lower shipment of cordless phones on customer’s financial problems Australia: Lower sales of cordless phones offset growth in baby monitor
Slide 28: Asia Pacific (continued)
Asia Pacific (continued) • CMS revenue up 63.0% to US$132.0 million • Higher sales of professional audio equipment, medical and health products and home appliances offset lower sales of communication products and hearables Professional audio: Boosted by six month contribution from DJ equipment bus
Slide 29: Other Regions
Other Regions Revenue by Product Line (US$ million) • Revenue down 16.3% to US$35.9 million, ELPs 1.7% of Group revenue 13.0 (-7.1%) • Lower sales of ELPs and TEL products offset higher sales of CMS • ELPs revenue down 7.1% to US$13.0 million. Higher sales in Latin America unable to compensate for l
Slide 30: Outlook
vtech Outlook >> > >> > INNOVATION BEYOND TECHNOLOGY 30
Slide 31: Outlook - Overview
Outlook - Overview • Group revenue difficult to gauge in FY2020 • New tariffs may potentially be applied • VTech now assessing the impact and taking steps to mitigate it • Pressure on materials prices to abate, labour costs to be stable 31
Slide 32: Outlook: ELPs
Outlook ELPs • Aim to strengthen market leadership in North America and Europe through new product launches • Standalone Products: Expansion of core learning products Introduction of first robotics toy, Myla the Magical Unicorn Launch of LeapBuilders 32
Slide 33: Outlook: Platform Products
Outlook • Platform Products: LeapFrog brand to introduce RockIt Twist, brand new handheld gaming product LeapStart Go to strengthen LeapStart range New KidiBuzz/KidiCom Max, with augmented reality games and live face-tracking photo filters, to be introduced in US and UK • Continued growth in A
Slide 34: Outlook: TEL Products
Outlook TEL Products • Core strategy to stabilise revenue through more new product introductions • Sales of commercial phones and other telecommunication products forecast to increase VoIP phones: New Snom product line launched in FY2019 to be joined by new cordless conference phone with wireless
Slide 35: Outlook: Telecommunication Products
Outlook • Commercial phones and other telecommunication products: Hotel phones: Supported by addition of customers in Macau and New Zealand Baby monitors, CAT-iq handsets, IADs: Will benefit from new product launches • Residential phones: Sales decline to slow as VTech recoups some lost market s
Slide 36: Outlook: CMS
Outlook CMS • On track for 18th consecutive year of growth, subject to further trade developments between US and China • Professional audio: To be boosted by rising sales at existing customers and the contribution of the new DJ equipment business • Hearables: Strong momentum to continue • Industrial
Slide 37: Outlook: CMS Initiatives
Outlook • New initiatives will help CMS expand revenue and lower costs: NPI (New Product Introduction) Centre Enhance supplier management 37
Slide 38: Thank You
Thank You >> = >> > INNOVATION BEYOND TECHNOLOGY 38