Vtech 2015 Annual Report Download - page 6

Letter to Shareholders
The portfolio of platform products will become more
diversified. The Group will build on the success of Kidizoom
Smartwatch to roll out a new generation of this popular
product. The calendar year 2015 will also see the launch of
new innovative platform products. Despite recent challenges,
VTech intends to stay in the children’s tablet market as it
remains a sizeable business around the world. Market research
shows that parents are still looking for VTech tablets, as they
are specifically designed for children, with content that is both
educational and engaging. The Group will focus on bringing
out tablet products that are even more compelling for both
children and their parents.
In TEL products, commercial phones and other
telecommunication products will continue to be the growth
drivers. New models will be introduced for ErisTerminal and
ErisStation to complete a full product range for VTech SIP
phone systems and conference phones. The highly successful
baby monitor range will be expanded with new video models
boasting a bigger screen, as well as Wi-Fi enabled devices.
The Group is also planning to enter the “Smart Home” arena
by launching a range of wireless monitoring devices based on
the ULE (Ultra Low Energy) standard. These products include
specially designed, ULE enabled cordless phones, IP hubs,
baby monitors and a high-definition Wi-Fi camera, which
wirelessly connect to a range of ULE controls and sensors.
In residential phones, the Group will continue to launch
feature-rich products with superior design to strengthen its
global leadership in cordless phones.
VTech CMS enjoys an enviable reputation for service and
expertise in certain product categories. Supported by
a stringent quality control system and an experienced
management team, the Group will continue to innovate in the
area of Design for Manufacture (DFM), delivering flexible service
and high quality products. Competence in handling low to
medium volumes and a high mix of different products enables
VTech to grow with new customers from a small base, which is
an important factor in the continuous growth of CMS.
Gains in Market Share
In addition to developing a steady stream of innovative
products and breaking into new product categories, VTech
strives to increase market share through improving services
and increasing its efforts in sales and marketing.
In the calendar year 2014, VTech gained market share and
reaffirmed its position as the number one cordless phone
manufacturer worldwide6. The Group also strengthened
its position as the global leader in ELPs from infancy to
preschool7. VTech CMS continued to be one of the world’s
top 50 EMS providers8.
Geographic Expansion
As markets outside North America and Europe currently
account for less than 10% of Group revenue, VTech will put
more emphasis on expanding in Asia Pacific and Other Regions.
In Asia Pacific, the Group will focus on increasing its presence
in China and Australia, where its products have been well
received. Recently, VTech has established its own sales office
for ELPs in Australia, aiming to drive growth by providing
better support to its retailer customers and increasing sales and
marketing efforts. The Group has also started selling residential
phones under the VTech brand in Australia, following the expiry
of the licensing agreement with Telstra in December 2014.
The Group will step up its efforts to extend its reach into Japan
and Korea. In Other Regions, selected markets in Latin America
and the Middle East will continue to be developed.
Operational Excellence
Operational excellence is crucial for raising competitiveness
and driving profitable growth. As wages in China continue
to rise and recruitment becomes more difficult, VTech will
increase automation by deploying more standard and
in-house custom-made machines. Together with continuous
process improvement and the optimisation of products for
manufacturing, this will allow the Group to reduce the number
of workers further while increasing output.
Outlook
The US economy continues its moderate recovery. However,
the prospects for Europe are uncertain and quantitative easing
by the European Central Bank has already led to a significant
depreciation of the Euro, which will have a negative impact on
our European revenue.
Despite a mixed picture, the Group is planning for a modest
revenue increase in the financial year 2016.
The business of ELPs is expected to be stable. Sales of platform
products are forecast to decline, as the children’s tablet market
remains challenging. The sales contribution of children’s
6 Source: MZA Ltd, 2015
7 Source: MarketWise Consumer Insights, LLC and NPD Group Retail Tracking Service.
Ranking based on 2014 total estimated annual retail sales in the combined toy
categories of infant electronic learning and preschool electronic learning
8 Source: Manufacturing Market Insider, March 2015
4 VTech Holdings Limited Annual Report 2015