Vtech 2016 Annual Report Download - page 9

Despite a strong US dollar and slow economic growth in both the US
and Europe, management expects the Group’s revenue to be higher
in the financial year 2017.
markets will start to launch Kidizoom Smartwatch DX later
this year following the successful debut in the US. For the
LeapFrog branded line, a new multi-activity learning platform
will be launched and will contribute to the overall platform
product business. The combined VTech and LeapFrog tablet
offerings will give the Group a strong presence in the children’s
educational tablet category.
The TEL products business is expected to improve,
buoyed by higher sales of commercial phones and other
telecommunication products. Global product launches, new
sales channels and geographic expansion will help to maintain
the momentum in baby monitors. Sales of CAT-iq handsets
will continue to increase based on the shift from PSTN (Public
Switched Telephone Networks) to VoIP (Voice over Internet
Protocol) technology. ErisTerminal is gaining customer
acceptance and market attention. New models with enhanced
features will be rolled out to the US market in the second
half of this financial year, while VTech has recently secured a
significant new project in Korea. ErisStation will benefit from
wider distribution and new SIP-based models designed for
large conference rooms that will be introduced in the US
market. The Group’s wireless monitoring system based on the
ULE (Ultra Low Energy) standard will add incremental sales.
The decline in sales of residential phones is expected to
moderate. In the US, the Group aims to capture more market
share by growing online sales and introducing new products
with enhanced Connect to Cell features. In Europe, the
business is expected to stabilise, while higher sales in Australia
and Japan will support growth in Asia Pacific.
Higher sales are forecast for CMS. Professional audio equipment
will grow further as VTech’s strong reputation attracts more
customers and a new design support approach secures new
projects. As category leaders, existing customers are expected
to grow their businesses further, resulting in additional orders
for the Group. Hearables will grow as existing customers
expand their businesses. The successful production of
the world’s first wireless smart earphones shows VTech’s
manufacturing capability in the growing area of miniaturisation,
enabling VTech CMS to target more business in miniaturised
electronic devices. Industrial products will grow as the Group
continues to benefit from the consolidation of suppliers by a
customer. However, for switching mode power supplies, the
change of ownership of a customer creates some uncertainty.
The Group has signed an agreement to acquire the assets from
a third party which allow VTech CMS to extend its supply chain
vertically and secure the supply of high precision metal tooling
and parts. Contribution from this acquisition would start in the
fourth quarter of the financial year 2017.
Costs remain a key area of focus for management. Material
costs are expected to be largely stable, but labour costs and
manufacturing overhead are expected to rise moderately.
The Group will therefore continue to offset cost increases
through more automation, process improvement and
product optimisation.
In closing, I wish to thank all my colleagues for their hard work
and dedication over the past year and our business partners for
their continuous support.
Allan Wong Chi Yun
Chairman
Hong Kong, 17 May 2016
5VTech Holdings Limited Annual Report 2016