VTech Announces FY2023 Annual Results
- Group revenue declined by
5.4% toUS $2,241.7 million - Gross profit margin was
28.3% , as compared with28.2% in FY2022 - Profit attributable to shareholders of the Company fell by
13.6% toUS $149.2 million - Final dividend of US42.0 cents per ordinary share, resulting in a full-year dividend of US59.0 cents per ordinary share
"VTech reported a decline in revenue and profit for the financial year 2023, as the challenging macro-economic environment in
Results and Dividend
Group revenue for the year ended 31 March 2023 declined by
Profit attributable to shareholders of the Company fell by
Basic earnings per share decreased by
The Board of Directors has proposed a final dividend of US42.0 cents per ordinary share, providing a full-year dividend of US59.0 cents per ordinary share, a
Costs
The Group's gross profit margin in the financial year 2023 was
Segment Results
Group revenue in
ELPs revenue in
In standalone products, at VTech, sales of Marble Rush® and Kidi line products pushed higher, boosted by the launch of new items such as Marble Rush Corkscrew Rush Set™ and My First Kidi Smartwatch™. These successes were, however, insufficient to offset lower sales of infant, toddler and preschool products, KidiZoom® cameras, Switch & Go® Dinos and the Go! Go! Smart family of products. At LeapFrog, sales of LeapLand Adventures™ grew on the back of a new licensed version, as did the brand's growing range of eco-friendly toys made with wood, as well as plant-based and reclaimed plastics. The successful roll-out of Magic Adventures™ Microscope, the latest addition to the popular range of toys with a scientific learning content, also contributed additional revenue. These gains were offset, however, by lower sales of infant, toddler and preschool products.
Sales of VTech platform products declined as those of KidiZoom Smartwatch, KidiBuzz™ and Touch & Learn Activity Desk™ fell. Despite this, KidiZoom Smartwatch topped the Youth Electronics Supercategory in the US and
During the financial year 2023, the Group's ELPs again won awards and recommendations from toy and parenting industry experts, key retailers and toy advisory boards in the US. LeapFrog's My Pal Scout Smarty Paws™ was named to Walmart's "Top Toy List", while VTech Level Up Gaming Chair™ and LeapFrog's Clean Sweep Learning Caddy™ made The Toy Insider's highly coveted "Hot 20" list of toys for the holiday season. Numerous other products from both the VTech and LeapFrog ranges garnered key awards from organisations including the National Parenting Center, Autism Live Toy & Gift Guide, Mom's Choice Awards, Academic's Choice and the National Parenting Product Awards.
TEL products revenue in
Sales of residential phones fell as the US residential phone market continued to contract and shipments were hampered by the tight supply of semiconductors in the first half of the financial year 2023. Despite this, the Group regained distribution with a key retailer and maintained its leadership position in the US residential phones market[4].
Commercial phones saw lower sales of multi-line phones, headsets and SIP (Session Initiation Protocol) phones. Production of multi-line phones was affected by tight semiconductor supply in the first half of the financial year 2023, while a major customer for headsets reduced its orders. Sales of SIP phones decreased because of a delayed product launch. These declines offset growth in hotel phones, which were buoyed by the Group's ability to maintain a stable supply of products and a well-received revamped product line featuring a more contemporary design.
Sales of other telecommunication products decreased, mainly attributable to declines in baby monitors and CareLine® products. Baby monitors saw lower sales as consumers traded down to lower-priced items owing to inflationary pressure. CareLine products, meanwhile, were affected by reduced orders from a customer and lower sales of VTech branded products.
In the financial year 2023, the Group gained market share and maintained its number one position in the baby monitor market in the US and
CMS revenue in
Group revenue in
ELPs revenue in
In standalone products, VTech recorded higher sales of Marble Rush, electronic learning aids and eco-friendly toys. However, these were insufficient to compensate for lower sales of infant, toddler and preschool products, KidiZoom cameras, the Kidi line and the Toot-Toot family of products. At LeapFrog, sales posted a slight increase as growth in eco-friendly toys and LeapLand Adventures offset declines in infant, toddler and preschool products. The launch of Magic Adventures Microscope added incremental business.
For platform products, sales at both VTech and LeapFrog brands fell. The decline at VTech was mainly attributable to lower sales of children's educational tablets, KidiZoom Smartwatch, the KidiCom® range of products and Touch & Learn Activity Desk. For LeapFrog, higher sales of Magic Adventures Globe were insufficient to offset lower sales of interactive reading systems.
During the financial year 2023, VTech and LeapFrog ELPs won numerous awards across the region. These included four "Grand Prix du Jouet 2022" awards given by La Revue du Jouet magazine in
Revenue from TEL products in
Sales of residential phones increased, as VTech branded phones continued to grow in the
By contrast, sales of commercial phones fell as growth in hotel phones was offset by declines in SIP phones and headsets. Hotel phones grew as the series with revamped designs was well-received by customers, while sales of SIP phones and headsets were negatively impacted by the economic slowdown in the region.
CMS revenue in
Sales of hearables declined because orders for a customer's Bluetooth headsets decreased as end-market demand fell due to competition, while demand for commercial headsets returned to normal levels. Sales of communication products decreased as orders for Wi-Fi routers no longer benefited from the surge in upgrading that had occurred during the COVID-19 pandemic. Professional audio equipment grew on a recovery in demand for audio mixers as events recovered with the return of normal social life. IoT products saw higher sales of smart meters as installation resumed in the
Group revenue in
Revenue from ELPs in
TEL products revenue in
CMS revenue in
Other Regions
Group revenue in Other Regions, comprising
ELPs revenue in Other Regions decreased by
TEL products revenue in Other Regions rose by
CMS revenue in Other Regions was immaterial in the financial year 2023.
Keep Steering Towards a Sustainable Future
Despite the complex and challenging operating environment the Group is facing, as a global leader in ELPs and residential telephony, as well as a world-leading CMS provider, VTech remains steadfast in its commitment to creating sustainable value to improve the lives of people and protect the planet for future generations. It achieved meaningful progress towards sustainability in the financial year 2023.
Leveraging its 47 years of excellence in technological innovation, VTech expanded its range of eco-friendly ELPs made from sustainable materials such as recycled polyethylene terephthalate (PET) bottles, reclaimed plastics and Forest Stewardship Council (FSC) certified wood. It also introduced a series of hotel phones made from recycled PET bottles. As for sustainable packaging, over
To combat climate change and reduce its impacts on the planet, VTech increased its use of renewable energy by accelerating the installation of solar panels at its manufacturing sites, and reduced volatile organic compounds (VOCs) emission through the increasing use of waterborne paint in its products and packing. On-going programmes for energy efficiency improvement, water consumption savings and waste reduction management are also in place to preserve natural resources in factory operations.
As a responsible corporate citizen, VTech is dedicated to providing a diverse, equitable and inclusive working environment for its employees. In addition to the gender diversity of its Board of Directors, about
Moving forward, VTech will uphold its culture of integrity, accountability and innovation to guide the company towards a sustainable future. With its solid sustainability foundation, VTech will continue to integrate economic growth, environmental protection and social responsibility in its business strategies to design, manufacture and supply innovative and high-quality products for the well-being of people and the benefit of society, aiming to drive sustainable value for its stakeholders and the communities.
Reorganisation of ELPs and TEL products operations
VTech is taking steps to reorganise its ELPs and TEL products operations. The goal is to create a stronger, leaner and more efficient organisation that can bring new products to the market faster and quickly respond to changing market conditions.
As part of this effort, the US ELPs business is undergoing a structural reorganisation, with a new leadership team that will reduce the number of management layers and downsize operations. In addition, the Group will increase the productivity of its products by improving product segmentation and portfolio management, as well as expanding license partnerships to maximise sales opportunities. The Group will also strengthen its product planning and marketing through more targeted advertising and promotional spend, enhanced marketing communications and leveraging its VTech and LeapFrog brands more effectively. To support growth further, VTech will rebuild its e-commerce team to ramp up online sales and implement measures to raise supply chain efficiency.
In order to create a leaner and more efficient TEL products business, VTech is streamlining its R&D (Research and Development) function in mainland
Outlook
The macro-economic outlook for the financial year 2024 is uncertain, but the challenges posed by persistent inflation and high interest rates in the US and
In view of this, the Group targets revenue to be flat year-on-year. Profitability, however, is forecast to recover. Costs are trending down and margins will be boosted further by the actions taken at the ELPs and the TEL products businesses.
The cost trends for the financial year 2024 appear favourable. Cost of materials is expected to decrease as the recent supply issues have mostly eased, even though the supply of a relatively small number of critical components will remain tight. Direct labour costs are no longer on the rise in mainland
The ELPs business is striving to achieve growth in the financial year 2024, as sales in
Growth in
In addition to new product launches, a new sales office in
Although the uncertain market conditions make forecasting difficult, TEL products revenue is projected to be higher in the financial year 2024. Sales of commercial phones are expected to increase, with growth in the Snom D8 series of SIP desksets, the multi-cell SIP DECT (Digital Enhanced Cordless Telecommunications) mobility system and the work-from-anywhere series, as the Group rolls out these products to more markets. This will be augmented by rising sales of the hospitality category led by hotel phones, following the addition of a new, advanced wireless thermostat designed for hotels.
For residential phones, growth in
Other telecommunication products will benefit from a recovery in baby monitors. VTech's leadership in
CMS revenue is forecast to be stable, as customers remain cautious in placing orders and managing inventories in view of global economic uncertainties. Sales of the key product categories, namely professional audio equipment, industrial and medical and health products are expected to remain largely stable. Growth will be seen in the areas of smart energy storage systems and smart home control systems, where customers are launching new products. After a two-year period of decline, sales of hearables are expected to stabilise. Work to complete the implementation of Industry 4.0 in the manufacturing facilities in mainland
"The reorganisations underway at our ELPs and TEL products operations will result in tighter, leaner management. This will allow us to leverage our brands and core competence more effectively and develop competitive, innovative products. CMS, meanwhile, is creating a more technology-driven and globally diversified manufacturing base. Although it has been a challenging twelve months, therefore, we are confident of a solid recovery in the financial year ahead," said Mr Wong.
[1] Circana (previously IRI and The NPD Group), Retail Tracking Service. Ranking based on total retail sales of VTech and LeapFrog products in the combined toy categories of Early Electronic Learning, Toddler Figures/Playsets & Accessories, Preschool Electronic Learning, Electronic Entertainment (excluding Tablets) and Walkers for the 12 months ended December 2022 [2] Circana, Retail Tracking Service, January – December 2022 [3] Circana, Retail Tracking Service, January – December 2022 [4] MarketWise Consumer Insights, LLC, April 2022 – March 2023 [5] Circana/Retail Tracking Service, US and [6] Circana, Retail Tracking Service, January – December 2022 [7] Circana, Retail Tracking Service, January – December 2022 |
About VTech
VTech is the global leader in electronic learning products from infancy through toddler and preschool and the largest manufacturer of residential phones in the US. It also provides highly sought-after contract manufacturing services. Since its establishment in 1976, VTech has been a pioneer in the electronic learning toy category. With advanced educational expertise and cutting-edge innovation, VTech products provide fun and learning to children around the world. Leveraging decades of success in cordless telephony, VTech's diverse collection of telecommunication products elevates both home and business users' experience through the latest in technology and design. As one of the world's leading electronic manufacturing service providers, VTech offers world-class, full turnkey services to customers in a number of product categories. The Group's mission is to integrate economic growth, environmental protection and social responsibility in its business strategies to design, manufacture and supply innovative and high quality products for the well-being of people and benefits of society, aiming to drive sustainable value for its stakeholders and the communities.
Note: Starting from 22:00, 17 May (HKT), the webcast of the results announcement can be accessed through VTech website via this link https://www.vtech.com/en/investors/financial-briefings.
This release is issued by VTech Holdings Limited through Golin. For further information, please contact:
Grace Pang VTech representative in
VTech Holdings Limited Carrie Wan, Golin
(852) 2680-1000 (office) (852) 2501-7976 (office)
grace_pang@vtech.com (email) cwan@golin.com (email)
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SOURCE VTech