VTech announce interim results
UK toy sales were stable
VTech announced its results for the six months ended 30 September 2018 with total group revenues dipping 3.5 per cent – although toy sales were a bright spark for the company.
For the six months to the end of September, the firm’s toy revenue continued to make gains in key markets despite the on-going impact of Toys R Us closures. Instead it was the company’s other major divisions in telecommunications (TEL) and contract manufacturing services (CMS) that bore the brunt of the losses.
"In the first six months of the financial year 2019 the Group's revenue and profit decreased,” said Allan Wong, Chairman and Group CEO of VTech Holdings Limited. “The lower-than-expected results were due to the overall weak performance of the Group's telecommunication products and the logistics issues in continental Europe for electronic learning products. There was, however, good progress in Asia Pacific, where VTech continues to expand its presence. The Group also maintained market leadership in its core product areas.”
In North America, VTech’s largest market,ELPs revenue rose by 9.6 per cent to US$210.9 million, with growth in both standalone and platform products. The increase resulted from strong sales in Canada and good growth in the US. This was achieved despite the closure of Toys R Us in the US, as the Group's existing customers expanded their shelf space and assortment of toys to capture the business previously conducted by the retailer. Furthermore, the positive reception of new VTech and LeapFrog branded products allowed the Group to consolidate its market leadership. During the first nine months of the calendar year 2018, the Group maintained its position as the number one manufacturer of electronic learning toys from infancy through toddler and preschool in the US and Canada.
Growth in standalone products was led by sales increases of both VTech and LeapFrog branded products.
Looking towards Europe,ELPs revenue declined by 17.1per cent to US$129.1 million, with lower sales of both standalone and platform products. Geographically, sales in the UK were stable despite the closure of Toys R Us, while France, Germany, the Netherlands and Spain all recorded sales decreases. During the period, the Group engaged a new third-party logistics vendor for continental Europe who relocated to a new warehouse. The transition resulted in reduced shipment of VTech branded products in the region, significantly impacting sales. LeapFrog branded products were unaffected, as these are marketed primarily in the UK. In the first nine months of the calendar year 2018 VTech maintained its position as the number one infant and toddler toy manufacturer in France, the UK and Germany.
Standalone products saw lower sales in Europe in the first six months. Sales of VTech standalone products were lower. However, good growth was achieved in LeapFrog standalone products, as new product introductions drove sales higher in the infant and preschool categories.
Platform product sales in Europe decreased during the period. Among VTech platform products, higher sales of KidiCom MAX were offset by lower sales of Kidizoom Smartwatches and children's educational tablets. Sales of LeapFrog platform products posted growth, however, as continued growth in LeapStart/MagiBookand the introduction of LeapStart 3D in the UK offset a decline in children's educational tablets.
"It has been a challenging first half of the financial year. With our strong and dedicated team, VTech will continue to maintain its market leadership and deliver sustainable value to shareholders," said Mr Wong.