VTech Holdings LimitedFY2014 Annual Results Announcement

22 May 2014

2

Shereen Tong

Group Chief Financial Officer

2

3

Financial Highlights

1.0%223.9226.1Operating Profit

0.9%201.5203.3Profit Attributable to Shareholders

of the Company

0.6%80.681.1Basic Earnings per Share (US cents)

Changes20132014(US$ M)

2.2%1,858.01,898.9Revenue

For the year ended 31 March

6.1%597.8634.3Gross Profit

Dividend per Share (US cents)

Gross Profit Margin %

Net Profit Margin %

Operating Profit Margin %

-0.1% pts10.8%10.7%

-0.1% pts12.0%11.9%

1.2% pts32.2%33.4%

16.0

64.0

80.0

• Interim

• Final

• Total dividend for the year

16.0

64.0

80.0 --

4

Revenue by Region

Total 1,898.9 100.0 1,858.0 2.2%

47.5Other Regions 2.5 54.9 -13.5%

Europe 41.7 769.9 2.8%791.8

North America 950.7 50.1 933.4 1.9%

Asia Pacific 108.9 5.7 99.8 9.1%

% Change20132014(US$ M)

For the year ended 31 March

5

Working Capital

Stocks 265.9

Stocks Turnover Days 87 days

Trade Debtors

Trade Debtors Turnover Days 54 days

208.6

31/03/14(US$ M)

276.9

90 days

224.9

62 days

31/03/13

6

Deposits and Cash 322.9

Net Cash Position 322.9

31/03/14(US$ M)

Liquidity Position

Total Borrowings --

308.6

308.6

31/03/13

--

7

King Pang

Group President

7

8

Operations Review - Costs

Gross margin improved in FY14:

• Lower material costs more than offset higher labour costs and

manufacturing overheads

• Material costs declined due to:

Subdued global demand

VTech’s effort in product re-engineering

• Productivity raised through automation and process improvement

Employed 11% fewer workers on average despite higher output

• Manufacturing overheads increased owing to higher production

capacity, inflation in China and the appreciation of the RMB

9

North America

• Revenue increased by 1.9% to

US$950.7 million, 50.1% of Group

revenue

• Higher TEL products and CMS

revenue offset lower ELPs

revenue

• ELPs revenue declined by 1.1% to

US$358.1 million

Lower sales of platform products,

including InnoTab, MobiGo and

V.Reader

Good growth for standalone products,

especially Go! Go! Smart Wheels,

infant products and Switch & Go Dinos

Revenue by Product Line (US$ million)

ELPs358.1(-1.1%)

TEL398.6(+2.4%)

CMS194.0(+6.5%)

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North America (continued)

Revenue by Product Line (US$ million) • TEL products revenue rose by 2.4% to

US$398.6 million

Maintained No.1 position in US residential

phones market

Sales of residential phones grew as brands

consolidated

Increased sales of commercial phones and

other telecommunication products, including

SMB phones, baby monitors, hotel phones and

CareLine

• CMS revenue increased by 6.5% to

US$194.0 million

Higher sales of professional audio equipment,

solid-state lighting, home appliances and

communication products offset lower sales of

industrial products

ELPs358.1(-1.1%)

TEL398.6(+2.4%)

CMS194.0(+6.5%)

1111

Europe

• Revenue increased by 2.8% to

US$791.8 million, 41.7% of Group

revenue

• Higher revenue from ELPs and

CMS offset lower TEL products

revenue

• ELPs revenue increased by 16.5% to

US$385.8 million

Higher sales in all major markets,

especially France

Growth in both standalone and

platform products

Revenue by Product Line (US$ million)

ELPs385.8(+16.5%)

TEL154.3(-24.2%)

CMS251.7(+7.1%)

1212

Europe (continued)

• TEL products revenue decreased by

24.2% to US$154.3 million

Revenue decline due to lower sales of

residential phones

Higher sales of baby monitors,

connected home devices and hotel

phones

Began shipments of conference phone

and SIP phones to UK and France

• CMS revenue increased by 7.1% to

US$251.7 million

Higher sales of professional audio

equipment, wireless headsets and home

appliances offset lower revenue from

switching mode power supplies and

medical and health products

Revenue by Product Line (US$ million)

ELPs385.8(+16.5%)

TEL154.3(-24.2%)

CMS251.7(+7.1%)

131313

Asia Pacific

• Revenue increased by 9.1% to

US$108.9 million, 5.7% of Group

revenue

• ELPs revenue increased by 9.2% to

US$21.3 million, with growth in China and

Korea

• TEL products revenue grew by 8.7% to

US$41.1 million, mainly due to higher

sales in Australia, China and Japan

• CMS revenue rose by 9.4% to

US$46.5 million, with higher sales in

Japan and Australia

Revenue by Product Line (US$ million)

ELPs21.3(+9.2%)

TEL41.1(+8.7%)

CMS46.5(+9.4%)

1414

Other Regions

• Revenue declined by 13.5% to

US$47.5 million, 2.5% of Group

revenue

• Other regions comprise Latin America, the

Middle East and Africa

• Revenue decline due to lower sales of TEL

products and ELPs

• ELPs revenue dropped by 28.0% to

US$13.4 million, with sales decline in all

regions, especially Latin America

• TEL products revenue fell 7.6% to

US$32.9 million, with sales decreases in

Latin America and Middle East

• CMS revenue was US$1.2 million, as

compared to US$0.7 million in FY2013

Revenue by Product Line (US$ million)

ELPs13.4(-28.0%)

TEL32.9(-7.6%)

CMS1.2(+71.4%)

1515

Allan Wong

Chairman and Group CEO

15

16

Growth Strategy

• More playsets and vehicles will be

added

• 100+ new standalone products will

be introduced globally

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• New Switch & Go Dinos Turbo

• Adding 9 new models to the range

• Will be launched in the US and

Europe

Product Innovation - ELPs

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Product Innovation - ELPs

18

World’s first children’s

smartwatch with a camera

Will be upgraded with new

versions, including InnoTab Max

Conference

Phone

Connected

home devices

Product Innovation – TEL products

SIP-based

products

Baby

monitors

• New conference phone model with

wireless microphones

• New SIP phones

• A 4-line, SIP-based telephone system

catering to the needs of small

businesses

• More video and audio models

• A new family of home monitoring devices

based on DECT ULE standard will be

launched in 2HFY15

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2020

Product Innovation – TEL products

Residential phones New CAT-iq handset

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CMS

• Offer DFM, flexible services and

manufacturing know-how in a number

of product categories

• Dedicated manufacturing facility for

China market

• Quality control and experienced staff

for low to medium volumes and high

mix of products

Product Innovation – CMS

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Growth Strategy

Geographic Expansion

• More emphasis on

expanding AP and Other

Regions

• AP: China key market, with

Japan, Australia, Taiwan,

Malaysia and Korea a

focus

• Other Regions: focus on

Latin America and Middle

East

Gains in Market Share

• Global leader in ELPs

from infancy to preschool

• World’s largest cordless

phone manufacturer

• A world’s top 50 EMS

provider

Operational Excellence

• Continue to work on

process improvement

and product optimisation

• Increase application of

automation

Operating Cost

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Outlook

23

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Outlook - Overview

• US economic recovery on a sustainable

footing

• Economies in Western Europe are

improving

Targeting revenue growth in FY2015 with a

stabilised market environment and new

products ready to be launched

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Outlook

ELPs

• Sales are forecast to increase as strong

momentum in standalone products

carries through

• Standalone products:

Go! Go! Smart Animals, Switch & Go

Dinos Turbo and new core learning

products will drive growth

• Platform products:

Sales are expected to be challenging

despite the introduction of Kidizoom

Smart Watch

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Outlook

TEL products

• Revenue is expected to increase

• Growth will be driven by commercial

phones and other telecommunication

products

• Residential phones:

Sales in Europe and Other Regions

expected to recover

Growth will continue in Asia Pacific

Market share gains in US

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Outlook

CMS

• Expected to grow further

• Business with existing customers will

increase

• New customers add stimulus to growth

• New factory building to cope with higher

expected demand will enter operation in

mid CY2015

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Outlook - Costs

Gross profit margin is expected to be stable

• Materials prices are expected to hold broadly

steady

• Labour costs and manufacturing overheads in

China will continue to rise

• Efficiency gains through automation, process

improvements and product optimisation offset

higher costs in China

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Conclusion

“VTech’s product innovation and operational

efficiency have given it market-leading positions

in a number of areas…

…The Group will continue to implement its

sustainability strategies, while exploring every

avenue of potential growth to generate higher

returns for shareholders.”

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Thank You

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