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VTech Announces FY2022 Annual Results

Universitas Amikom Purwokerto, Kampus IT dan Bisnis Digital Banyumas, Jawa Tengah.

Stable revenue despite global supply chain disruptions

HONG KONG, May 16, 2022 /PRNewswire/ —

  • Group revenue remained essentially flat at US$2,370.5 million
  • Sales of electronic learning products surpassed US$1 billion
  • Global materials shortages, supply chain disruptions, unprecedented increase in freight charges, and rising costs affected results
  • Gross profit margin fell from 30.6% to 28.2%
  • Profit attributable to shareholders of the Company declined 25.2% to US$172.7 million
  • Final dividend of US51.0 cents per ordinary share, resulting in a full-year dividend of US68.0 cents, down 25.3% year-on-year

VTech Holdings Limited (HKSE: 303) today announced its results for the year ended 31 March 2022, reporting stable revenue and lower profit.

“VTech reported stable revenue and lower profit for the financial year 2022. This was largely the result of coronavirus (COVID-19) related disruptions to production and supply chains, together with cost pressures resulting from global shortages of materials and shipping containers,” said Mr. Allan Wong, Chairman and Group CEO of VTech Holdings Limited.

Results and Dividend

Group revenue for the year ended 31 March 2022 decreased slightly by 0.1% to US$2,370.5 million, from US$2,372.3 million in the previous financial year. Higher sales in North America were insufficient to offset lower sales in Europe, Asia Pacific and Other Regions.

Profit attributable to shareholders of the Company fell by 25.2% to US$172.7 million. The decline in profit was mainly attributable to lower gross profit as costs rose significantly.

Basic earnings per share decreased by 25.2% to US68.5 cents, compared to US91.6 cents in the financial year 2021.

The Board of Directors has proposed a final dividend of US51.0 cents per ordinary share, providing a full-year dividend of US68.0 cents per ordinary share, a 25.3% decrease from the US91.0 cents declared in the previous financial year. This represents a dividend payout ratio of 99.4%.

Costs

The Group’s gross profit margin in the financial year 2022 was 28.2%, as compared with 30.6% in the previous financial year.

The decline was mainly attributable to the unprecedented increase in freight costs arising from container shortages globally. Direct labour costs and manufacturing overhead were also higher than the last financial year, mainly because of the appreciation of the Renminbi and the unstable supply of materials, which impacted productivity. The increases in materials prices, especially of electronic components and plastics, also contributed to the decline in gross profit margin. These pressures were partially offset by a change in the product mix.

Improvement was seen in the second half as the Group raised prices for its products. Freight cost also declined slightly after the peak shipping season, but the supply of semiconductors remained tight.

Segment Results

North America

Group revenue in North America increased by 7.4% to US$1,068.5 million in the financial year 2022, with higher sales of electronic learning products (ELPs), telecommunication (TEL) products and contract manufacturing services (CMS). North America was VTech’s largest market, accounting for 45.1% of Group revenue.

ELPs revenue in North America rose by 3.5% to US$555.6 million. Higher sales in the US offset a decline in the Canadian market, where the transition to a new third-party logistics vendor resulted in logistics issues that reduced shipment of VTech and LeapFrog products. The Group maintained its position as the number one manufacturer of electronic learning toys from infancy through toddler and preschool in the US[1]. In Canada, despite the logistics issues, VTech remained the number one supplier in the infant, toddler and preschool toys category[2].

The growth in ELPs came from higher sales of VTech and LeapFrog branded standalone products. At VTech the sales increase came primarily from three product categories. Infant, toddler and preschool products were led by higher sales of new products including Sort & Recycle Ride-On Truck. KidiZoom® Cameras again performed well, with especially good results from KidiZoom PrintCam and KidiZoom Creator Cam. Switch & Go® Dinos achieved growth following new product launches. The introduction of Marble Rush also added incremental revenue. These increases offset declines in the Kidi lines and Go! Go! Smart® family of products, as well as Go! Go! Cory Carson® vehicles and playsets. LeapFrog saw growth in infant and toddler products. Among these, the Learning Friends 100 Words Book series sold especially well and was augmented by a new addition to the range “100 Words About Places I Go”. The roll out of the new LeapLand Adventures TV video game also boosted sales. These successes offset a decline in preschool products as sales of licensed products fell.

Platform products declined as higher sales of LeapFrog products were insufficient to offset lower sales of the VTech ranges. LeapFrog benefited from growth in Magic Adventures Globe and interactive reading systems, as the content of the Magic Adventures Globe was expanded. LeapStart® was also refreshed with new hardware. This compensated for a decline in sales of children’s educational tablets that was mainly due to the semiconductor shortages, which also led to a slowdown in new LeapFrog Academy subscriptions.

VTech platform products trended lower owing to sales declines for KidiZoom Smartwatches and KidiBuzz. Shipment of the new products in these ranges, namely KidiBuzz 3 and KidiZoom Smartwatch DX3, was held up by semiconductor shortages and shipment delays. Low channel inventory also led to lower sales. This offset growth for Touch & Learn Activity Desk, to which a new model was added during the financial year 2022.

During the 12 months, the Group’s ELPs received a large number of awards from toy and parenting industry experts, key retailers and toy advisory boards, in multiple categories. Both Hover Pup™ and KidiZoom PrintCam made it into Walmart’s “Top Rated by Kids” list. KidiZoom PrintCam received 10 awards, while all four introductory products in the Marble Rush line received the esteemed STEAM Toy Accreditation Seal of Approval. In addition, LeapLand Adventures made the “2021 Best Toy Awards” in Good Housekeeping magazine.

TEL products revenue in North America grew by 1.6% to US$274.9 million. The increase came as gains for commercial phones and other telecommunication products offset lower sales of residential phones. Sales to online channels continued to see good increases.

Sales of commercial phones and other telecommunication products increased as business activity returned to normal, following the relaxation of COVID-19 restrictions. Well-received new product launches also drove growth. Baby monitors, headsets, Snom branded SIP (Session Initiation Protocol) phones and hotel phones all achieved higher sales.

Baby monitors were boosted by additional placements in key retailers, expanded online sales and new product launches. As a result, VTech strengthened its position as the largest baby monitor manufacturer in the US and Canada[3]. During the financial year 2022, the first LeapFrog branded baby monitor, featuring a baby care app, was launched to a positive market reception. Headsets grew on the back of increased orders from an existing customer. The Snom branded SIP phones gained market share due to a stable supply of products. Sales of hotel phones recovered as they benefited from the lifting of COVID-19 restrictions, while the launch of models with a new industrial design further supported growth. Although the residential phones market returned to its downward trend, VTech maintained its leadership position in the US residential phones market[4].

There was considerable industry recognition for the Group’s baby monitor products and their online sales growth during the financial year 2022. The LeapFrog LF925HD Remote Access Smart Video Baby Monitor was a “2022 National Parenting Product Awards Winner”. In addition, VTech won the “BrandSpark Most Trusted Awards 2022 (Category of Baby Monitor)” given by BrandSpark International. In recognition of the online sales growth of VTech baby monitors, VTech won the “Top E-commerce US Market Share Gain (Category of Baby Monitors)” award in the “Consumer Electronics Industry Performance Awards” given by the NPD Group, Inc. in January 2022[5].

CMS revenue in North America increased by 26.8% to US$238.0 million, with growth in most product categories. Business activity resumed as social distancing measures eased. There was also a full year sales contribution from the plant in Tecate, Mexico, following the completion of the acquisition in April 2021.

Professional audio equipment benefited from higher sales to a customer that had acquired a new business. The relaxation of social distancing measures lifted sales of professional audio equipment used in concert halls, lecture theatres and churches. Sales of solid-state lighting grew as tenders and project-based activities resumed. Industrial products also benefited from the resumption of business activities, boosting orders for PCBA (printed circuit board assembly) for coin and note recognition machines. Medical and health products saw sales increase as orders for hearing aids grew. Sales of communication products rose on increased orders for VoIP (Voice over Internet Protocol) phones for commercial use, following the successful re-launch of products by a customer.

Europe

Group revenue in Europe declined by 5.6% to US$1,025.1 million in the financial year 2022, as higher sales of ELPs were offset by lower sales of TEL products and CMS. Europe was the Group’s second largest market, representing 43.2% of Group revenue.

ELPs revenue in Europe grew by 6.8% to US$375.1 million, with sales picking up in the second half as new products arrived on the shelves and channel inventory improved. Standalone products saw higher sales for the full financial year, while platform products posted a decline mainly owing to materials shortages. Geographically, sales increased in France, Germany, Spain and the Netherlands while the UK recorded a sales decline. In the calendar year 2021, VTech remained the number one infant and toddler toys manufacturer in France, the UK, Germany and the Benelux countries, while regaining the number one position in Spain[6].

In standalone products, both VTech and LeapFrog branded products registered growth. For the VTech brand, sales of infant, toddler and preschool products, the KidiZoom Camera range, Kidi line products, Switch & Go Dinos and electronic learning aids were all higher. Growth in the region was augmented by the successful launch of the new Marble Rush line. These increases offset declines in the Toot-Toot family of products and Toot-Toot Cory Carson® vehicles and playsets. The LeapFrog brand saw growth in infant, toddler and preschool products, augmented by the launch of LeapLand Adventures.

Platform products saw lower sales of both VTech and LeapFrog products. Materials shortages and logistics problems resulted in late availability of certain new products and low channel inventory. These included a new generation of the interactive reading system LeapStart/MagiBook, KidiCom® Advance 3.0, Magic Adventures Globe, KidiCom MAX and children’s educational tablets. These declines offset gains for Touch & Learn Activity Desk. Sales of KidiZoom Smartwatches were stable.

During the financial year 2022, the Group’s ELPs gained several important awards in Europe. In France, Marble Rush Ultimate Set, Ruby, mon chat paillettes magiques (Glitter Me Kitten), KidiStar DJ Mixer, Funny Sunny and Genio My First Laptop won a total of five awards in different categories in the “Grand Prix du Jouet 2021” awards given by La Revue du Jouet magazine, the highest among all manufacturers. In the UK, Count-Along Basket & Scanner was a “Gold Winner (Best Toy for Pretend Play)” in the “MadeForMums Toy Awards 2021”. KidiZoom Video Studio was named “Best Toy of the Year 2021 (Imitation Toys Category)” by the Spanish Association of Toy Manufacturers. Marble Rush Ultimate Set was also named one of “The Best Toys 2021 (Category of 4-6 Years)” in “The Best Toys in the Netherlands” awards.

Revenue from TEL products in Europe fell by 14.2% to US$93.8 million. Lower sales of residential phones and other telecommunication products offset higher sales of commercial phones.

In Europe, the Group’s…

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