Vtech 2016 Annual Report Download - page 16

Europe
Revenue in Europe in Last 5 Years
12 13 14 15 16
719.3 769.9 791.8 812.3 795.9
US$ million
0
150
300
450
600
750
900
Group revenue in Europe decreased by 2.0% to US$795.9
million in the financial year 2016, as lower sales of both TEL
products and ELPs offset an increase in CMS revenue. Europe
was VTech’s second largest market, accounting for 42.9% of
Group revenue.
ELPs revenue in Europe fell by 10.2% to US$325.5 million. This
decline in US dollar terms was driven by the depreciation of
the European currencies. Among the Group’s key Western
European markets, sales in France, the UK, Germany and Spain
grew slightly in local currency terms. Despite the tough foreign
exchange environment, VTech gained further market share
in the calendar year 2015, strengthening its position as the
number one infant and toddler toy manufacturer in France,
the UK and Germany6. The Group also maintained its number
one position in preschool electronic learning in France,
Germany and Spain7.
Standalone products saw a decrease in sales. Core infant,
toddler and preschool learning products, as well as Switch &
Go Dinos, recorded sales declines. However, there was growth
in the Toot-Toot family of products and Little Love, while
Kidizoom Action Cam and Flipsies brought additional revenue.
In the financial year 2016, VTech won four “2015 Grand Prix
du Jouet” awards, presented by La Revue du Jouet magazine
in France. This was the highest number of awards granted to
any manufacturer, with Toot-Toot Drivers Super RC Raceway
gaining the top “Toy of the Year 2015” award.
In platform products, sales of InnoTab/Storio® children’s
educational tablets and software contracted further. The
market has continued to decline and competition remained
keen, while the cyber-attack had a negative impact on sales.
Although sales of Kidizoom Smartwatch also experienced a
slight decrease, the range continues to win industry awards. In
November 2015, Kidizoom Smart Watch Plus was named one
of the “Dream Toys 2015 – Toys for Christmas 2015 (Category
of Tots Get Busy)” by the UK Toy Retailers Association. In late
September 2015, VTech’s new multi-function handheld device
6 Source: NPD Group, Retail Tracking Service
7 Source: NPD Group, Retail Tracking Service
DigiGo hit the shelves in the Group’s key European markets,
giving children a handy gadget for text messaging, pictures,
videos and music. It has been well-received. The 5” Storio MAX
tablets, which were launched in France and Germany, also
enjoyed success.
Revenue from TEL products in Europe decreased by 13.3% to
US$136.4 million. The sales growth in commercial phones and
other telecommunication products was unable to offset fully
the decline in sales of residential phones.
Sales of residential phones decreased as the fixed-line
telephone market contracted. This was compounded by a
weak Euro, which reduced the purchasing power of the
Group’s customers, leading to a further decline in sales.
In contrast, commercial phones and other telecommunication
products posted good growth. Baby monitors was the best
performing sector, driven by higher sales of video models.
CAT-iq handsets registered a sales increase, benefiting from
their first full-year sales contribution. Sales of integrated access
devices (IADs) also grew as customers began shipments of a
new generation of products. In addition to the well-established
ODM (original design manufacturing) business in Europe,
during the financial year 2016 VTech started selling ErisTerminal
and ErisStation under the VTech brand in selected European
markets, achieving steady growth in both product lines.
CMS revenue in Europe increased by 14.3% to US$334.0 million,
with sales rising in all product categories.
Professional audio equipment benefited from being given
more projects by existing customers, while new customers also
made a sales contribution. Sales of hearables trended higher,
as VTech grew its revenue share with a major existing customer,
while a new customer offering the world’s first wireless smart
earphones ramped up orders. Despite the change in ownership
of a customer, switching mode power supplies experienced a
temporary boost in sales. Sales of home appliances rose owing
to more orders from an existing customer.
12 VTech Holdings Limited Annual Report 2016
Management Discussion and Analysis Review of Operations