VTech Announces 2024/2025 Interim Results
Higher gross profit despite lower revenue
HONG KONG, Nov. 12, 2024 /PRNewswire/ --
Group revenue decreased 4.5% to US$1,089.7 million
Gross profit margin improved from 28.5% to 31.5%
Profit attributable to shareholders of the Company declined 6.6% to US$87.4 million
Interim dividend of US17.0 cents per ordinary share, unchanged
Gigaset integration on track for full completion by end of calendar year 2024
Financial position remains strong
VTech Holdings Limited (HKSE: 303) today announced its results for the six months ended 30 September 2024.
"VTech reported lower revenue and profit in the first half of the financial year 2025. A decline in sales of contract manufacturing services offset growth in electronic learning products and telecommunication products. Profit attributable to shareholders of the Company decreased owing to lower Group revenue and higher operating expenses arising from the integration of the assets of GST Communications GmbH (formerly known as Gigaset Communications GmbH), despite an improvement in gross profit," said Mr. Allan Wong, Chairman and Group CEO of VTech Holdings Limited.
Results and Dividend
Group revenue for the six months ended 30 September 2024 decreased by 4.5% to US$1,089.7 million, from US$1,140.9 million in the corresponding period last year. Lower sales in North America, Europe and Asia Pacific offset higher sales in Other Regions.
Profit attributable to shareholders of the Company declined by 6.6% to US$87.4 million. The decrease in profit was mainly attributable to lower revenue and higher operating expenses arising from the integration of the assets of GST Communications GmbH, which offset an improvement in gross profit.
Basic earnings per share decreased by 6.5% to US34.6 cents, compared to US37.0 cents in the same period of the previous financial year.
The Board of Directors has declared an interim dividend of US17.0 cents per ordinary share, unchanged from the interim dividend declared in the first half of the financial year 2024.
Costs
The Group's gross profit margin in the first six months of the financial year 2025 was 31.5%, as compared with 28.5% in the same period of the previous financial year. This was mainly due to the lower cost of materials arising from the decline in material prices and a change in product mix, as well as the gross profit contributed by Gigaset Technologies GmbH ("Gigaset") following the acquisition of the assets of GST Communications GmbH on 5 April 2024. These offset higher direct labour costs, manufacturing overheads and freight charges as percentages of Group revenue.
The increases in direct labour costs and manufacturing overheads as percentages of Group revenue compared with the same period last year were mainly due to an increase in production volume, with an associated increase in the factory workforce, as well as the inclusion of workers at the Gigaset factory in Germany following the acquisition. These offset the positive impact of the depreciation of the Renminbi against the US dollar and an improvement in productivity. The increase in freight charges, meanwhile, was mainly due to higher container freight rates compared with the same period last year.
Integration of Assets of GST Communications GmbH (formerly known as Gigaset Communications GmbH)
On 5 April 2024, VTech completed the acquisition of the assets of GST Communications GmbH, a global leader in communications technology based in Bocholt, Germany. Its operations in DECT (Digital Enhanced Cordless Telecommunications) cordless phones, business telephony solutions for enterprise customers and Android-based smartphones are now managed and operated by the new VTech entity Gigaset Technologies GmbH.
The Group took swift and efficient action to integrate the assets into its global operations during the six months following the acquisition. The supply chain was restored and changes to procurement were instituted to lower costs. By September, production and product supply had returned to normal.
VTech has also been re-establishing the sales force in all major European countries. Communications and interactions have been enhanced to speed up decision-making in the launch of new products.
To unlock synergies in the development of new products and their manufacture, VTech's engineering teams are now working closely with the product development teams in Germany to strengthen the product roadmap, reduce product costs and accelerate new product introduction.
Segment Results
North America
Group revenue in North America decreased by 7.4% to US$453.1 million in the first six months of the financial year 2025. Higher sales of electronic learning products (ELPs) were offset by lower sales of telecommunication (TEL) products and contract manufacturing services (CMS). North America became VTech's second largest market, accounting for 41.6% of Group revenue.
ELPs revenue in North America increased by 7.4% to US$223.8 million. The growth was driven by higher sales in both the US and Canada. In the US, the toy market began to stabilise, after contracting in the calendar year 2023. The new leadership team further capitalised on the upturn with a successful revitalised sales and marketing strategy. Standalone products were the main growth driver, with both the VTech and LeapFrog brands recording higher sales. As a result, VTech retained its leadership in electronic learning toys from infancy through toddler to preschool in the US and Canada in the first nine months of the calendar year 2024[1].
In standalone products, VTech saw higher sales of infant, toddler and preschool products, the Kidi line and electronic learning aids. These offset declines for the Go! Go! Smart family of products, Switch & Go® Dinos, Marble Rush® and eco-friendly toys. Meanwhile, sales of KidiZoom® cameras held steady. LeapFrog managed to achieve growth in infant, toddler and preschool products, as well as eco-friendly toys. The Magic Adventures™ series also achieved higher sales, as the successful roll-out of Magic Adventures Binoculars contributed additional revenue. However, these were partially offset by lower sales of LeapLand Adventures™.
Platform products saw sales increase, mainly driven by LeapFrog products. LeapFrog saw higher sales of educational tablets, interactive reading systems and Magic Adventures Globe. However, subscriptions to LeapFrog Academy™ reported a decline. For VTech, sales of platform products held steady during the period. Sales of Touch & Learn Activity Desk™ saw an increase, offsetting declines in KidiZoom Smartwatches and KidiBuzz™.
In September, LeapFrog launched its "Everything Starts with Reading" campaign, designed to inspire children to achieve success in reading. Showcasing a range of the brand's best-selling educational tools, all tailored to different development stages, the campaign features partnerships with a diverse group of influential voices, who talk about how reading helped their lives.
The Group's ELPs received numerous awards in North America during the first six months of the financial year 2025 for their quality and inventiveness. In the US, VTech Sort & Discover Activity Wagon™ was named in Walmart's "2024 Top Toys List". KidiZoom Smartwatch DX4 was included in Target's "2024 Bullseye's ...
