VTech sales soar in first half

Revenue and profit rises for the firm, during the six months ended September 30th, 2010.
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Group sales for the period increased by 10.3 per cent to $813.9 million. Growth was driven by Europe, Asia Pacific and other regions. During the period, all product lines achieved sales increases in Europe.

Profit rose 2.3 per cent to $93.6 million. Net profit margin fell from 12.4 per cent to 11.5 per cent, due to a change in product mix, higher cost of materials, rising labour costs and Renminbi appreciation.

"VTech turned in a solid performance in the first half of the financial year 2011. Despite economic uncertainty and rising costs, both revenue and profit increased," said Mr. Allan Wong, chairman and group CEO of VTech Holdings.

"Sales were especially strong in Europe, where all product lines saw increases. In North America, our electronic learning products (ELPs) are seeing the benefit of the new platform products we have introduced."

Sales in North America decreased by 4.6 per cent to $421.6 million in the first half of the financial year. The decline was mainly due to lower sales of other products, which offset the growth in electronic learning products.

Electronic learning sales in North America increased by 14.6 per cent to $118.7 million in the first half, with growth driven by the launch of new platform and standalone products.

The two new platform products, V.Reader and MobiGo, have been on retail shelves since June 2010. V.Reader is an interactive e-reading system for children aged between three and seven years. MobiGo is a handheld educational gaming system with touch control for children aged between three and eight years. Retail performance to-date for both products has been good.

Standalone products continued to sell well. As VTech introduced new items to the market and expanded shelf space for infant and pre-school products, there has been healthy growth in these categories. The new line of infant bath toys has been selling especially well.

Revenue in Europe was boosted by gains in all product lines. Sales increased by 32.4 per cent over the first half of the previous financial year to $298.6 million. Europe accounted for 36.7 per cent of group revenue.

Electronic learning sales in Europe increased by 13.4 per cent to $108.2 million in the first half. Growth was driven mainly by standalone products. As MobiGo only started to hit retail shelves in late August, while V.Reader (Storio in Europe) is only launched in the UK this financial year, their contributions to sales in this period have been limited.

Despite weakness in the economy, the UK proved to be the strongest performing market. The Kidizoom range remained especially popular. The Kidizoom VideoCam was selected as one of the twelve "Dream Toys" for Christmas by the UK's Toy Retailers Association. In contrast, sales in France and Germany started slow during the period.

Sales of Electronic learning products in Asia Pacific declined by 4.9 per cent to $9.8 million in the first half. During the period, retailers in some countries sought to work through their inventory, resulting in lower orders.

In China, VTech's first electronic learning designed specifically for the market was launched in September. It is a curriculum based pen-reading system with downloadable textbook content. The product has been well received. As the Group is currently building up the distribution channels, sales to-date have been very limited.


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