VTech delivered top-line growth across its major markets in
the financial year 2014, reporting record revenue despite a
generally soft retail environment. Gross margin continued to
improve, as material costs were lower. The Group’s efforts to
raise productivity through automation also began to bear fruit.
Profit attributable to shareholders of the Company, however,
showed lower growth due to higher advertising and promotion
expenses. During the financial year, the Group’s leadership in
core product categories was further strengthened.
Results and Dividend
Group revenue for the year ended 31 March 2014 increased by
2.2% to US$1,898.9 million. The increase was mainly attributable
to higher revenue in North America, Europe and Asia Pacific,
offsetting lower revenue in Other Regions.
Profit attributable to shareholders of the Company rose 0.9%
to US$203.3 million. During the financial year 2014, the Group
increased its advertising and promotion expenses to support
InnoTab® in the US in response to a competitive market. Basic
earnings per share grew by 0.6% to US81.1 cents, compared to
US80.6 cents in the previous financial year.
The Board of Directors has proposed a final dividend of
US64.0 cents per ordinary share, providing a full-year dividend
of US80.0 cents per ordinary share, the same as the dividend
paid in the financial year 2013.
Costs and Operations
The Group’s gross margin improved in the financial year 2014
as lower material costs more than offset higher labour costs
and manufacturing overheads. Material costs declined due to
subdued global demand and VTech’s efforts in re-engineering
products for lower cost. The Group also succeeded in reducing
the impact of the rise in the minimum wage in China, via its
initiatives to raise productivity through automation and process
improvement. As a result, VTech employed 11% fewer workers
on average compared with the previous financial year despite
output being higher. Manufacturing overheads increased
owing to higher production capacity, inflation in China and the
appreciation of the Renminbi.
Our Business
The Group’s sales composition continued to evolve in response
to changes in market demand.
In the financial year 2014, Electronic Learning Products
(ELPs) remained the Group’s largest product line, followed by
telecommunication (TEL) products and contract manufacturing
services (CMS).
Overall sales of the Group via e-tailers have risen strongly,
outpacing the traditional sales channels. Sales of content
downloaded from VTech’s app store, Learning Lodge™,
continued to see good growth.
Even though the European toy markets were generally down
or flat in the calendar year 2013, VTech ELPs outperformed in
the region to deliver 16.5% revenue growth. The Group was the
number one player in the overall Infant Toys category in France,
the UK and Germany in the calendar year 2013
1
. Furthermore,
Storio® was the number one children’s educational tablet in
Europe for the second year in a row
2
. In the US, Go! Go! Smart
Wheels® delivered a strong performance in the financial
year 2014. Sales of InnoTab, however, were lower due to
competition from low-cost consumer electronics tablets. In the
financial year 2014, standalone products accounted for about
68% of total ELPs revenue, while platform products accounted
for approximately 32%, as compared with about 64% and 36%
respectively in the financial year 2013.
Dear Shareholders,
1
Source: NPD Group, Retail Tracking Service
2
Source: NPD Group, Retail Tracking Service. Ranking based on total retail sales of
Storio for the combined market of France, the UK, Germany, Spain and Italy
3
VTech Holdings Limited
Annual Report 2014
Letter to Shareholders
