Vtech 2015 Annual Report Download - page 16

Management Discussion and Analysis Review of Operations
EUROPE
Group revenue in Europe increased by 2.6% to US$812.3 million
in the financial year 2015. Higher sales of TEL products and CMS
offset a sales decline in ELPs. Europe was VTech’s second largest
market, accounting for 43.2% of Group revenue.
ELPs revenue in Europe decreased by 6.0% to US$362.6 million,
as higher sales of standalone products failed to offset a
decrease in sales of platform products. The depreciation of
the Euro and Pound Sterling against the US dollar during the
financial year 2015 also negatively impacted the reported
revenue. Among the Group’s key Western European markets,
sales in Germany increased, while those in the UK, France and
Spain declined.
For platform products, VTech’s educational tablet InnoTab/
Storio faced similar challenges as in North America, namely,
high channel inventory and market contraction. Despite this,
InnoTab/Storio remained the best-selling children’s tablet in
Europe, and regained the number one position among all toys
in the top five European markets in the calendar year 201412.
Kidizoom Smartwatch was introduced to the Group’s major
European markets in June 2014 and performed well, becoming
one of the top 10 best-selling new toys in the UK in 201413.
It was also selected as one of the “Top 12 Dream Toys 2014” by
the British Toy Retailers Association.
For standalone products, growth was driven by the Toot-Toot
family of products. New models were added to the popular
Toot-Toot Drivers® range, while Toot-Toot Animals® was
launched in VTech’s key European markets. In the calendar year
2014, VTech again increased its market share and strengthened
its position as the number one infant toy manufacturer in
France, the UK and Germany, while becoming the largest infant
toy manufacturer in Spain14.
Among new products, the Group launched Kidizoom Action
Cam in its major European markets in March 2015. This latest
addition to the popular Kidizoom range of cameras has been
well received by customers. In the fourth quarter of the financial
year 2015, new models of Little Love, a range of interactive
baby dolls, hit the shelves. They met with an especially positive
reception in France, where the new Peek-a-Boo doll became the
best-selling nurturing doll of Spring 201515.
Revenue from TEL products in Europe increased by 2.0% to
US$157.4 million, as higher sales of commercial phones and
other telecommunication products offset a sales decline in
residential phones.
For commercial phones, sales of SIP phones increased as
VTech continued to expand its distribution channels. Sales of
CAT-iq handsets enjoyed strong growth as Network Operators
continue to encourage the replacement of traditional PSTN
(Public Switched Telephone Network) services with VoIP
(Voice over Internet Protocol) services. Sales of baby monitors
increased as the Group introduced new video models,
completing a full range of products for the market.
Sales of residential phones were lower, mainly due to the
decline of the fixed-line telephone market. Despite this, VTech
maintained its market share as one of the leading cordless
phone manufacturers in the region16.
CMS revenue in Europe increased by 16.1% to US$292.3 million,
driven by higher sales in most product categories. Sales of
wireless headsets saw growth as VTech secured more orders
from existing customers. One client placed additional orders in
recognition of good customer service while another launched
new products that were well-received by the market. Sales of
switching mode power supplies were higher as an existing
customer increased orders in a new business area for data
centres, and in response to the region’s general upgrade from
3G to 4G technology. Sales of home appliances rose owing
to more orders from an existing customer in Italy. Sales of
professional audio equipment, however, registered a decline,
as a client transferred products requiring custom configuration
to in-house production.
12 Source: NPD Group, Retail Tracking Service. Ranking based on total retail sales
of InnoTab/Storio by unit for the combined market of France, the UK, Germany,
Spain and Italy
13 Source: NPD Group, Retail Tracking Service
14 Source: NPD Group, Retail Tracking Service
15 Source: NPD Group, Retail Tracking Service. Ranking based on total retail sales of
all nurturing dolls in France by unit from January to April 2015
16 Source: MZA Ltd, 2015
Revenue in Europe in Last 5 Years
US$ million
900
750
600
450
300
150
011 12 13 14 15
667.6
719.3 769.9 791.8 812.3
14 VTech Holdings Limited Annual Report 2015