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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 2022reporting 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 WongChairman 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 millionfrom 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 Canadadespite 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 Monitors)” 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 millionwith growth in most product categories. Business activity resumed as social …
Full story available on Benzinga.com
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