Vtech 2016 Annual Report Download - page 7

VTech is strongly committed to protecting customers’ data.
With the assistance of one of the world’s leading cyber security
teams, the Group has taken steps to strengthen data protection
on Learning Lodge and its connected services. The Group
has also worked with law enforcement agencies to recover
the stolen customer data and to ensure that copies of the
information that were disseminated to two other parties (a
journalist and a cyber security consultant) have been destroyed
or taken off-line, held securely and not disseminated further.
Our Business
In the financial year 2016, electronic learning products (ELPs)
remained the largest product line of the Group, followed by
telecommunication (TEL) products and contract manufacturing
services (CMS).
Sales via e-tailers and other online channels have continued
to grow. Revenue from content downloaded from Learning
Lodge declined, however, affected by lower sales of children’s
educational tablets and by the effects of the cyber-attack.
The financial year 2016 posed challenges for VTech’s ELPs
business. The strong US dollar depressed reported revenue.
Globally, sales of children’s educational tablets continued to fall
owing to keen competition and a contraction in the market.
The cyber-attack on Learning Lodge added to the decline in
sales, though the sales of Kidizoom® Smartwatch continued to
be strong globally. As a result, the share of ELPs revenue from
platform products, including related software, fell to about 16%
of total ELPs revenue in the financial year 2016, as compared to
approximately 23% in the financial year 2015.
Faced with these challenges, VTech’s ELPs continued to gain
market share. Globally, VTech consolidated its position as
the number one supplier of electronic learning toys from
infancy through toddler and preschool1. Geographically, ELPs
achieved notable overall sales growth in Australia, China and
Japan. In contrast to platform products, sales of standalone
products posted good growth, with their share of ELPs revenue
rising to about 84% from approximately 77% in the previous
financial year. Among them, the core infant and toddler lines,
as well as the Go! Go! Smart family of products, did particularly
well. Adding to the momentum, Kidizoom Action Cam was
successfully launched globally. These successes enabled VTech
to increase market share further and strengthen its market
position. The Group remained the number one infant and
toddler toys manufacturer in France, the UK and Germany2,
while in the US it was the number one supplier of electronic
learning toys from infancy through toddler and preschool in
the calendar year 20153.
TEL products faced a difficult market environment for
residential phones in the financial year 2016. The fixed-line
telephone market has continued to shrink globally, a situation
that was compounded by the strong US dollar, which affected
sales outside the US. As a result, the revenue from residential
phones dropped by 19.4% year-on-year.
1 Source: NPD Group, Retail Tracking Service and Global Market Share Estimates by MarketWise Consumer Insights, LLC. Ranking based on total retail sales in the combined toy
categories of Toddler Electronic Learning, Toddler Figures, Playsets and Accessories, Preschool Electronic Learning, Electronic Entertainment excluding Tablets and Walkers for
the 12 months ending December 2015
2 Source: NPD Group, Retail Tracking Service
3 Source: NPD Group, Retail Tracking Service. Ranking based on total retail sales in the combined toy categories of Toddler Electronic Learning, Toddler Figures, Playsets and
Accessories, Preschool Electronic Learning, Electronic Entertainment excluding Tablets and Walkers for the 12 months ending December 2015
3VTech Holdings Limited Annual Report 2016