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educational tablets will become smaller year-on-year, while
Kidizoom Smartwatch will continue to grow. Furthermore, new
innovative platform products will contribute additional revenue
streams. Standalone products are forecast to grow, bolstered
by the expansion of the Go! Go! Smart family, nationwide
distribution of Go! Go! Smart Friends in the US and the launch
of Kidizoom Action Cam and Flipsies worldwide. Extension of
the Little Love/Baby Amaze line will enable VTech to increase
its presence in the dolls category in Europe, while winning shelf
space in the US. The new core infant and preschool learning
products will strengthen the Group’s leadership position in
these categories.
TEL products are expected to maintain their positive sales
trend, led by commercial phones and other telecommunication
products. In commercial phones, the Group will benefit from
the full deployment of CAT-iq (Cordless Advanced Technology
- internet and quality) handsets in major European countries
such as France, Germany and Switzerland. The introduction
of the new conference phones and SIP phone models will
further stimulate growth. VTech is also stepping up its efforts
on the interoperability of its SIP based products with Network
Operators, which will boost market presence further. Higher
sales of other telecommunication products will come from
the strong momentum of baby monitors, as sales channels are
expanded and further new products introduced. The global
launch of the wireless monitoring system will add incremental
sales. Despite the continued decline of the overall fixed-line
telephone market, sales of VTech residential phones are
forecast to be stable as the Group is maintaining its leading
position in North America and Europe, while growing its market
share in Asia Pacific and Other Regions.
Sales of CMS are expected to increase. Professional audio
equipment is on track to return to a growth path. The customer
who faced excess inventory has worked through the issue and
intends to increase orders. Business with other professional
audio customers will grow, as VTech secures more projects
owing to its service excellence. The Group also added new
clients in professional audio equipment in the last financial
year, who will ramp up orders gradually in this financial year.
Wireless headsets will achieve further growth as existing
customers launch new products. VTech’s strong reputation
in the wireless product area enables the Group to enter new
product categories, such as smart hearable and wearable
devices. Business from solid-state lighting will remain stable.
In contrast, the change of ownership of a customer in switching
mode power supplies creates uncertainty. To cope with the
growth, a new factory building has been built for CMS. It will
commence operations in July 2015, increasing manufacturing
capacity by 25%.
On gross margin, the Group does not anticipate any
improvement year-on-year against the backdrop of the strong
US dollar. Cost of materials is expected to be stable and the
Renminbi to remain in a narrow range. Labour costs and
manufacturing overheads in China will rise further. The Group
will continue to offset these cost increases through automation,
process improvement and product optimisation.
In closing, I would like to thank all my colleagues for their
dedication and hard work over the past year, my fellow
directors for their counsel and all shareholders, customers
and suppliers for their support. VTech has a culture rooted
in innovation and technology. Our market leadership, R&D
capability, strong balance sheet and operational efficiency
differentiate us from our competitors. We will continue to
bring out innovative products, increase market share, expand
geographically and strive for operational excellence to
generate sustainable returns for shareholders.
Allan Wong Chi Yun
Chairman
Hong Kong, 19 May 2015
VTech has a culture rooted in
innovation and technology. Our market
leadership, R&D capability, strong
balance sheet and operational efficiency
differentiate us from our competitors.
We will continue to bring out innovative
products, increase market share,
expand geographically and strive for
operational excellence to generate
sustainable returns for shareholders.
5
VTech Holdings Limited
Annual Report 2015