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VTech Holdings Ltd2011/2012 Interim Results Announcement
16 November 2011
2
Shereen TongGroup Chief Financial Officer
3
Financial Highlights
-5.8%102.296.3Operating Profit
-5.4%93.688.5Profit Attributable to Shareholders of the Company
-5.8%37.835.6Basic Earnings per Share (US cents)
Changes20102011(US$ M)
5.4%813.9858.1Revenue
For the six months ended 30 September
-0.3%261.9261.0Gross Profit
Interim Dividend per Share (US cents) 16.016.0 --
Gross Profit Margin %
Net Profit Margin %
Operating Profit Margin %
-1.2% pts11.5%10.3%
-1.4% pts12.6%11.2%
-1.8% pts32.2%30.4%
4
Revenue by Region
Total 858.1 100.0 813.9 5.4%
42.7Others 5.0 42.6 0.2%
Europe 39.2 298.6 12.7%336.5
North America 431.2 50.2 421.6 2.3%
Asia Pacific 47.7 5.6 51.1 -6.7%
% Change20102011(US$ M)
For the six months ended 30 September
5
Working Capital
Stocks 320.2 296.8
Stocks Turnover Days 108 days 119 days
Trade Debtors 323.6
Trade Debtors Turnover Days 58 days 60 days
339.5
30/09/1030/09/11(US$ M)
229.8
85 days
198.8
63 days
31/03/11
6
Deposits and Cash 128.5 181.1
30/09/1030/09/11(US$ M)
Liquidity Position
Total Borrowings - -
128.5 181.1
333.1
31/03/11
-
333.1Net Cash Position
7
King PangGroup President
8
Rising costs - the biggest challenge in 1H:
• Higher raw materials prices
• Further wage increases in China
• RMB appreciation
Operations Review - Costs
Price increase + cost reduction + efficiency enhancement
to counteract cost increases
9
North America
• Revenue up 2.3% to US$431.2 million, 50.2% of Group revenue
• Higher revenue from CMS offset slight revenue decreases from TEL products and ELPs
• TEL revenue down 0.7% to US$220.2 million
− The decrease reflects the maturity of the market and low level of new housing starts
− Maintained No.1 position in US
− Made good inroads into SMB and hotel phone segments
Revenue by Product Line (US$ million)
TEL220.2(-0.7%)
ELPs115.4(-2.8%)
CMS95.6(+17.9%)
10
North America (continued)
• ELP revenue down 2.8% to US$115.4 million
− Lower shipment of V.Reader
− InnoTab revenue has not been recognised in 1H
− Revenue from standalone products was flat
• CMS revenue increased by 17.9% to US$95.6 million
− Professional audio equipment was a major growth driver
− Higher sales of telecommunication products and commercial solid state lighting also supported growth
Revenue by Product Line (US$ million)
TEL220.2(-0.7%)
ELPs115.4(-2.8%)
CMS95.6(+17.9%)
1111
Europe• Revenue up 12.7% to US$336.5
million, 39.2% of Group revenue
• All product lines posted growth
• TEL revenue up 3.6% to US$115.4 million
− Growth was driven by increased orders from existing customers
− Germany and France posted the strongest growth
− Attained No. 1 cordless phone manufacturer in Western Europe
Revenue by Product Line (US$ million)
TEL115.4(+3.6%)
ELPs124.6(+15.2%)
CMS96.5(+22.2%)
1212
Europe (continued)
• ELP revenue up 15.2% to US$124.6 million
− Growth was driven by both platform and standalone products
− France, Germany and the Benelux countries turned in the best results
− Shipment in UK was down, primarily due to carried-forward inventory at some retailers
• CMS revenue up 22.2% to US$96.5 million
− Switching mode power supplies were especially strong
− Professional audio equipment and wireless headsets also saw increased orders
Revenue by Product Line (US$ million)
TEL115.4(+3.6%)
ELPs124.6(+15.2%)
CMS96.5(+22.2%)
131313
Asia Pacific• Revenue down 6.7% to US$47.7
million, 5.6% of Group revenue
• TEL revenue decreased by 12.3% to US$14.2 million, primarily due to weakness in the Japanese market
• ELP revenue rose by 7.1% to US$10.5 million, driven by growth in South-East Asian countries and China.
• CMS revenue declined by 8.4% to US$23.0 million, mainly due to lower orders for LED light bulbs, offsetting higher sales from handheld radiation detectors and medical equipment
Revenue by Product Line (US$ million)
TEL14.2(-12.3%)
ELPs10.5(+7.1%)
CMS23.0(-8.4%)
1414
Other Regions• Revenue up 0.2% to US$42.7
million, 5.0% of Group revenue
• Growth in Latin America was balanced by declines in the Middle East and Africa
• Revenue from TEL products fell by 12.3% to US$27.0 million
• Revenue from ELPs rose by 30.8% to US$15.3 million
Revenue by Product Line (US$ million)
TEL27.0(-12.3%)
ELPs15.3(+30.8%)
CMS0.4(+300.0%)
15
Growth Strategy
1616
Growth StrategyGeographic Expansion
• AP + other regions = 10.6% of Group sales
• China is our focus
• ELPs: Expanding steadily in China
• TEL: Will sell AT&T phones in China in 4QFY12
Gains inMarket Share
• World’s No. 1 cordless phone manufacturer
• World’s No. 1 ELP supplier
• CMS growth out-paces global EMS market
• New SMB & hotel phones
• InnoTab for US & UK
• Storio & MobiGo for key EU markets
• Strong product pipeline in 2012
Product Innovation
Operational Excellence
• Tight cost control
• Efficient operations
• SG&A: % of Group revenue continued to drop (15.9% in 1HFY12 vs 16.2% in 1HFY11)
Operating Cost
1717
Our Strengths
Excellent R&D
Strong Balance Sheet
Market Leadership Position
TEL -No.1 Global Manufacturer Efficient Operations
1818
Allan WongChairman and Group CEO
19
Outlook - Overview
• Global economy is highly uncertain
− Economic growth in the US likely to remain sluggish
− Consumer confidence in Europe is weakening
• Cautiously optimistic of achieving top line growth in 2H
• Margins could at least stabilise, as there are signs that cost pressures are abating
20
Outlook - Overview
• Continue to explore every avenue to improve margins:
− Stepping up automation
− Product design optimisation
− Tight cost control
2121
Outlook
• Remain positive for TEL products
• North America – Increasing sales of SMB and hotel phones should offset some of the sales decline in home cordless phones
• Europe – Revenue and market share will grow, with both existing and new customers
• Asia Pacific – Sales will pick up in Japan and we will start selling AT&T branded fixed line telephones in China in 4QFY12
• Other regions – Sales will improve as Middle East and South America return to growth path
2222
Outlook
• Planning for year-on-year growth for ELPs across all our major markets
• North America – Stepped up actions to bolster holiday sales; solid contributions from InnoTab in 2H
• Europe – Good performance of Storio, MobiGo, Kidi-series and other standalone products will continue; UK will return to a growth path
• Asia Pacific – Growth will continue in 2H; biggest challenge in Australia
2323
Outlook
• CMS will continue to outperform the global EMS market
• Professional audio – Will continue to add new customers because of excellent know-how and strong reputation
• Wireless headsets – Expect further growth due to proliferation of Unified Communications
• Switching mode power supplies – Business will remain stable
• Solid state lighting – Growth in commercial solid state lighting will not be sufficient to offset the decline in LED light bulbs for consumers
24
Conclusion
• While we are optimistic of delivering top line growth, profitability will remain challenging
• However, Group’s margins are showing an improving trend
• VTech is well-positioned to grow even more strongly once the global economy enters a sustained period of recovery
2525
Thank You