VTech saw fiscal first-half profit jump 45.1% to $103.6m, thanks to recent acquisitions and fast-growing Asian market.
For the six months through September, VTech’s revenue grew 5.8% year on year to $1.04b, driven primarily by growth in the Asia-Pacific region, where turnover leaped 43.9%. Revenue in North America – the toymaker’s largest market, contributing 48% of total turnover – climbed 5.3% from a year ago.
Earnings comparisons were helped by the absence of one-time costs incurred by the acquisition of US rival LeapFrog last year. Both LeapFrog and Snom Technology – a German phone maker also purchased in 2016 – have already made positive contributions to VTech’s half-year balance sheet.
The Hong Kong company has stopped shipping products to Toys R Us stores, pending the negotiation of new terms following the retailer filing for Chapter 11 bankruptcy protection. VTech President Pang King-fai said VTech’s sales to Toys R Us up to the date of the bankruptcy filing had been covered by credit insurance, but shipments thereafter will not be covered.
While VTech is currently negotiating with Toys R Us about supplies during the holiday seasons, Pang said the stock could easily be absorbed by other retailers, with demand for toys running high globally.
Electronic learning toys have become a key driver of VTech’s business growth, with sales of the products improving 7.8% in the first half and contributing 34% of total revenue, according to the CFO Shereen Tong. By contrast, revenue from its traditional telecommunications products dipped 2% during the period, she added.