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VTech Holdings Ltd today announced its results for the six months ended 30 September 2011, reporting higher revenue on the back of growth in North America and Europe. Group revenue for the period rose by 5.4% over the same period last year to US$858.1 million. This was mainly owing to higher revenue in Europe for all product lines, and the good performance of Contract Manufacturing Services (CMS) in North America. Profit attributable to shareholders of the Company declined by 5.4% to US$88.5 million. The decrease in profit was mainly due to higher cost of materials, further increases in labour costs and the continuing appreciation of the Renminbi. “Although we managed to achieve top line growth for the period, rising costs continued to pose the biggest challenge to the Group. Year-on-year, higher raw materials prices were compounded by further wage increases in China and Renminbi appreciation. These factors pressured gross margin and resulted in lower profit attributable to shareholders of the Company for the period. In response, we have raised prices, as well as stepped up our cost reduction and efficiency enhancement efforts,” said Mr. Allan Wong, Chairman and Group CEO of VTech Holdings Limited. Europe Europe was the best performing region in the first half of the financial year 2012. Despite the sluggish economies in most of the main European markets, Group revenue in the region was up by 12.7% to US$336.5 million. All product lines posted growth during the period. Europe accounted for 39.2% of Group revenue. Revenue from ELPs in Europe was US$124.6 million in the first half of the financial year 2012, a 15.2% increase compared to the same period last year. This performance was driven by both platform and standalone products. Solid contributions were seen from the full launch of Storio® (the product name for V.Reader in Europe) and MobiGo® across the main European markets. The strong growth of the standalone products continued, especially in the infant and pre-school ranges. Geographically, France, Germany and the Benelux countries turned in the best results. Shipment was down in the UK, primarily due to carried-forward inventory at some retailers. This notwithstanding, InnoTab was launched in the UK to great accolades, and has been named one of the “10 Cool Toys” for Christmas by the Toy Retailers Association. Outlook The global economy is highly uncertain. In the US, economic growth is likely to remain sluggish given the high level of unemployment. In Europe, the sovereign debt crisis in certain countries is already weakening consumer confidence. Nonetheless, the Group remains cautiously optimistic of achieving top line growth in the second half. Moreover, there are signs that cost pressures are abating, and that margins could at least stabilise. In addition to striving for top line growth, VTech will continue to explore every avenue to improve margins. To reduce the labour content of its products further, the Group is stepping up the pace of automation in its production. A key focus of product design will remain to optimise the cost of materials and manufacturing. The Group will also continue to exercise tight cost control over its operations. The retail environment for ELPs is expected to be challenging and unpredictable in the second half of this financial year. Consumer buying power and sentiment have been subdued. Retailers have been delaying replenishment decisions until the last minute. Despite these challenges, VTech is, nonetheless, planning for year-on-year growth across all its major markets for ELPs. In Europe, good performance of Storio, MobiGo, the Kidi-series, as well as other standalone products is forecast to continue. Increased shipment, including of InnoTab, during the second half of the financial year, is expected to return business in the UK to a growth path. |
