Page 4 - VTech Holdings Limited 2015/2016 Interim Report

Chairman’s Statement
Revenue from TEL products in North America decreased by 7.0% to US$200.2 million. Sales of residential phones were lower, as the fixed-line telephone market has continued to contract. Nonetheless, VTech strengthened its number one position in the US residential phone market3.
Sales of commercial phones and other telecommunication products, in contrast, continued to rise. Baby monitors led the growth on a strong sell-through and additional product placements. Sales of VTech’s four-line small business phone system also increased, as the new series was well received by the market. The VTech branded ErisStationTM, a conference phone with wireless microphones, and ErisTerminalTM, a SIP (Session Initiation Protocol) based business phone system, saw steady growth in sales, as the product ranges were completed with the addition of new models.
CMS revenue in North America rose by 19.8% to US$112.7 million. The growth was driven by higher sales of professional audio equipment and industrial products, which offset lower sales of solid-state lighting. Professional audio equipment posted good growth as a major client increased orders after resolving excess inventory issues, while several other customers saw higher demand for their products. Growth in this category also benefited from the addition of new customers. Industrial products recorded higher sales
as VTech gained more business following a customer’s decision to consolidate suppliers. Sales of solid-state lighting, however, trended lower as the demand for the customers’ products decreased.
Europe
Group revenue in Europe in the first six months of the financial year 2016 was up 3.8% to US$373.7 million, mainly due to higher CMS sales. Europe is the second largest market of the Group, representing 40.3% of Group revenue.
ELPs revenue in Europe decreased by 8.7% to US$129.2 million, a decline that was primarily due to the depreciation of the European currencies against the US dollar and lower sales of platform products. Among VTech’s key Western European markets, sales in the UK increased, while those in France, Germany and Spain declined. During the first nine months of the calendar year 2015, VTech continued to gain market share and strengthened its position as the number one infant toy manufacturer in France, the UK, Germany and Belgium4.
In platform products, as in North America the children’s educational tablet market remained challenging. The contraction of the market and tough competition led to lower sales of InnoTab/Storio®, which offset higher sales of Kidizoom Smartwatch.
Sales of standalone products in Europe were flat during the period. Toot-Toot Drivers®, Toot-Toot Animals® and Little Love® recorded growth, offsetting the declines in Switch & Go Dinos, infant and preschool products. Kidizoom Action Cam and Flipsies were rolled out to the Group’s major European markets during the period, generating incremental sales.
VTech ELPs won acclaim in Europe during the first six months of the financial year 2016. In France, recognition included four “2015 Grand Prix du Jouet” awards presented by La Revue du Jouet magazine. This was the most awards granted to
any manufacturer, with Toot-Toot Drivers Super RC Raceway gaining the top “Toy of the Year 2015” award. Toot-Toot Drivers Garage won a gold medal in the UK’s prestigious “Independent Toy Awards”, while Kidizoom Action Cam was the Belgian Federation of Toys’ “Toy of the Year 2015”.
TEL products revenue in Europe decreased by 4.1% to US$74.4 million. Sales of residential phones were lower
as the fixed-line telephone market has continued to contract. Despite the weak Euro which impacted the Group’s customers, sales of commercial phones and other telecommunication products rose significantly.
Revenue in North America by Product Line
for the six months ended 30 September 2015
Electronic Learning Products
32.2%
US$148.7 million
Contract Manufacturing Services
24.4%
US$112.7 million
Telecommunication Products
43.4%
US$200.2 million
Total: US$461.6 million
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Source: MarketWise Consumer Insights, LLC
Source: NPD Group, Retail Tracking Service. Ranking based on total retail sales of infant toys for the calendar year ending September 2015
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VTech Holdings Limited 2015/2016 Interim Report