Good afternoon, ladies and gentlemen, and welcome to all our viewers online. Today, VTech Holdings Limited is announcing its results for the year ended 31st of March 2024. Let me introduce our management. Mr. King Pang, Executive Director and Group President. Mr. Allan Wong, Chairman and Group CEO of VTech Holdings. Mr. Andy Leung, Executive Director and CEO of Contract Manufacturing Services. Ms. Shereen Tong, Group Chief Financial Officer. First of all, Ms. Tong will present the group financial performance. Next, Mr. Leung will review the group's operations in North America and Europe. Mr. Pang will then continue to share the rest of the segment results and talk briefly about the recent Gigaset acquisition before giving management outlook for the coming financial year. We will finish our presentation with a Q&A session. Now, may I invite Ms. Tong to open today's presentation. Ms. Tong, please.
Thank you, Grace. Good afternoon, ladies and gentlemen, and our viewers online. First of all, I would like to share with you the financial highlights of the group for the year ended 31st of March 2024, compared with the same period of the last year. As you see from the slide, the revenue of the group reduced by 4.3% to $2,145.7 million. The decrease in revenue was mainly due to the decrease in revenue in North America, Europe, and other regions, which offset the higher sales in Asia Pacific. The gross profit of the group increased by 0.2% to $634.9 million. Our gross profit margin also improved from 28.3% to 29.6%.
The increase in gross profit and gross profit margin was mainly due to the decreases in freight charges and inventory provisions, as well as the lower direct labor cost and manufacturing overhead arising from the depreciation of the renminbi against the U.S. dollar, and the reduction in number of workers compared with the last financial year. These offset the negative impacts of our higher cost of materials as a percentage of the group's revenue resulting from the change in product mix, despite the decline in material prices. Our operating profit increased by 8.7% to $196.2 million, and our operating profit margin also improved from 8.1% to 9.1%. The improvement in operating profit and operating profit margin was mainly due to the increase in gross profit and gross profit margin, as well as the reduction in total operating expenses.
Our profit attributable to shareholders increased by 11.7% to $166.6 million, and our net profit margin also increased from 6.7% to 7.8%. As a result, our basic earnings per share increased by 11.5% to $0.66, and our board of directors has proposed a final dividend of $0.48, bringing the total dividend per share for the year to $0.65. Turning to the revenue by region. North America remained the largest market of the group, accounting for 43% of the group's revenue. Our revenue in North America reduced by 6.3% to $922.6 million. The decline in revenue was mainly due to the lower sales of our electronic learning products and telecom products, which offset the higher sales of our Contract Manufacturing Services. Our sales to European market reduced by 3.1% to $888.3 million.
It was mainly due to the lower sales of our electronic learning products and telecom products, which offset the higher sales of our Contract Manufacturing Services. In Asia Pacific region, the revenue of the group increased by 0.6% to $317.7 million. It was mainly due to the higher sales of our Contract Manufacturing Services, which offset the lower sales of our electronic learning products and telecom products. Other regions include Latin America, Middle East, and Africa. The group's revenue in other region reduced by 29% to $17.1 million. The decrease in sales in other region was mainly due to the lower sales of our electronic learning product and telecom products. Our stock balance as at March 31st, 2024 reduced from $475.5 million to $348 million compared with the same period of the last year. Our stock turnover days also shortened from 128 days to 101 days.
The lower stock balance was mainly due to the decrease in raw materials and finished goods as the supply constraints had eased compared with the same period of the last year. Our trade debtor balance as at March 31st, 2024 reduced from $277.2 million to $224.6 million compared with the last financial year. Our trade debtors turnover day, however, increased slightly from 59 days to 60 days. The lower trade debtors balance was mainly due to the decrease in revenue in the fourth quarter of the financial year 2024, compared with the same period of the last year. Our financial positions remain very strong with our debt-free. Our net cash balance as at March 31st, 2024 increased from $198.5 million to $322.1 million compared with the same period of last year.
The increase in net cash balance was mainly due to the higher net cash generated from operating activities and the lower dividend payment compared with the last financial year. These offset the advanced payment for the acquisition of certain assets from Gigaset, as well as the unfavorable foreign currency exchange movement on the group's net asset as a result of the depreciation of the foreign currencies against the U.S. dollar during the financial year. That's all of my presentation. I will now invite Mr. Andy Leung to share with you our operations review. Mr. Leung, please.
Thank you, Shereen. Welcome to all of you joining us today. We will begin the review of operations by looking at costs. The gross profit margin in the financial year 2024 was 29.6% as compared with 28.3% in the previous financial years. The improvement came as freight charges and inventory provision reduced. Direct labor cost and manufacturing overhead also declined because of increased automation, reduction in factory workforce, and the depreciation of the RMB against U.S. dollar. Despite lower material price, cost of material as a percentage of group revenue went up because of a change in product mix. This offset part of the improvement in the gross profit margin. Looking now to our performance by region, we begin, as usual, with North America.
Group revenue in North America decreased by 6.3% to $922.6 million, as lower sales of electronic learning products and telecommunications products offset an increase in Contract Manufacturing Services. North America remained our largest market, accounting for 43% of the group revenue. ELPs revenue in North America decreased by 11.1% to $415.9 million. Sales decreased in both the U.S. and Canada due to demand from customers being lower and the toy market contracted. Standalone and platform products both registered lower sales. Both the VTech and LeapFrog brands reported lower revenue. Despite these challenges, VTech maintained its leadership in electronic learning toys from infants through toddler to preschool in the U.S. and Canada in the calendar year 2023.
In the standalone products at VTech, higher sales of the Go! Go! Smart Family of products, preschool products, Switch & Go Dinos, and the KidiLife was insufficient to offset lower sales of infants products, KidiZoom camera, Marble Rush, and eco-friendly toys. LeapFrog managed to achieve higher sales of eco-friendly toys. The successful rollout of Magic Adventures Telescope contributed additional revenue. However, this was offset by lower sales of infants, toddler, and preschool products, LeapLand Adventures and Magic Adventures Microscope. Platform products also saw a decline for both brands. The decrease at VTech was due to the lower sales of KidiZoom smartwatch, KidiBuzz and Touch & Learn Activity Desk . The decline at LeapFrog was a result of lower sales of educational tablets, interactive reading system, and Magic Adventures Globe. Subscription to LeapFrog Academy also declined.
Telecommunications product revenue in North America reduced by 6.2% to $201 million, with decline in all three major product categories. Growth in Canada was offset by a decrease in the U.S. A continuous market contraction saw sales of residential phones decline. Reduction in sales space from a major U.S. retailer led to lower sales of AT&T-branded phones. During the financial year, VTech maintained its leadership position in the U.S. residential phones market. Commercial phones registered an overall sales decline. There were higher sales of hotel phones and Snom-branded SIP phones, but this was unable to offset declines for headset and multi-line analog phones. The group revitalized its go-to-market strategy for SIP phones, driving the sales increase in this product line. Our range of Snom D7 desktop designed for hotel administration led to the growth in hotel phones.
A new thermostat for the home channel also started to make a sales contribution. The decline in headsets was due to a customer placing fewer orders. Sales of multi-line analog phone decreased as the product made the transition to a new generation. Sales of other telecommunications products also declined. Baby monitors saw sales decrease due to keen competition. A reduction in order led to lower sales of CareLine, residential phone, and IADs. We launched several important new products during the financial year, including a smart baby monitor that uses AI to provide sleep analytic and real-time alerts. In financial year 2024, the group maintained its number one position in the baby monitors market in the U.S. and Canada. CMS revenue in North America increased by 11.1% to $305.7 million in the financial year 2024. The main driver was professional audio equipment.
Power amplifiers, mixers, and wireless microphones benefited from improved material supply, clearing the accumulated backlog orders. The full revival of music concert and related activity following the pandemic, along with the new product launches, further increased demand for such equipment. Sales of IoT products were boosted by a new customer in the field of smart home control system. By contrast, sales of industrial product decreased as order for printed circuit board assembly for coin and note recognition machine reduced. Solid-state lighting also experienced a decline as a slowdown in construction activity reduced the demand for LED lighting. I turn now to Europe. Group revenue decreased by 3.1% to $888.3 million, as lower sales of ELPs and telecommunications product offset an increase at CMS. The regions accounted for 41.1% of group revenue.
ELP revenue in Europe reduced by 4.4% to $315.6 million with declines in both standalone and platform products. Sales reduced in all key markets, including France, the U.K., Germany, and Spain. We nevertheless remained the number one infant and toddler toy manufacturer in France, the U.K., Germany, Spain, and the Benelux country in the calendar year 2023. For standalone products, the sale decrease came as growth in LeapFrog products were unable to offset a decline for the VTech brand. At LeapFrog, infant, toddler, and preschool products saw higher sales offsetting a decrease in LeapLand Adventures. Sales of Magic Adventures Microscope and eco-friendly toys were stable. The successful launch of Magic Adventures Telescope in key European markets contributed incremental revenue. At VTech, preschool products, electronic learning aids, and Marble Rush recorded higher sales.
These gains, however, were insufficient to offset lower sales of infant products, the Go! Go! Smart Family of products, KidiZoom camera, the Kidi Life, Switch & Go Dino, and eco-friendly toys. Platform products saw lower VTech sales at children's educational tablet, KidiZoom smartwatch, the KidiCom range of product and Touch & Learn Activity Desk. The KidiCom range of product and Touch & Learn Activity Desk all declined. By contrast, sales of LeapFrog products improved, driven by Magic Adventures growth. The sales of interactive reading system were stable. Revenue from telecommunications products in Europe decreased by 19.9% to $77.2 million as residential phone, commercial phone, and other telecommunications product all reported declines. Sales of VTech residential phone improved as the brand expanded into France and Italy. The growth was further supported by increasing sales in the U.K. and Germany.
This was offset by lower shipment to ODM customer who were facing over inventory. The decline in commercial phones came as the sales of Snom brand desk phone and hotel phone trended lower. Inflation and high interest rates led to reduced business investment in Europe, affecting demand for SIP phone and hotel phones. Countering the overall decline, the latest DX SIP desk set has been well accepted by market despite their premium price point. Building out the Snom desk set offering further, the multi-cell M500 mobility system was launched in February this year. In hotel phones, to target further growth, Snom Technology has been appointed as an additional sales channel for us in continental Europe. In other telecoms end product, growth in baby monitors was insufficient to compensate for a drop in CareLine residential phone, KidIQ headsets, and IADs. These declines came as ODM customer reduced order for over-inventory.
Nonetheless, VTech and baby monitors make good progress in the U.K., strengthening our position as the number one baby monitor brand in the country. CMS revenue increased by 1% to $495.5 million. Medical and health products, communication products, and smart energy storage system saw higher sales, offsetting decline in hearables, professional audio equipment, IoT products, and automotive products. Sales of home appliance were stable. Medical and health product reported growth as hearing aid customer launch new product and gain market share. Sales of hair removal products were stable. In communication products, wireless router sales improved as the customer built up inventory to prepare for moving production to a new location. The growth was further supported through gaining market share by VTech. Sales of energy storage system ramped up as the customer captured market share following new product launches. Sales of hearable decreased.
This was a result of customers' headsets for mobile phone reached the end of their life cycle. Sales of headset for commercial use returned to normal levels after the pandemic. Although a new customer was added, professional audio equipment reduced as orders for home audio interface product declined. IoT products saw lower orders for smart meter as the customer lost market share. Order for internet-connected thermostats and air conditioning control declined as demand returned to normal level after the energy crisis in Europe. Sales of automotive products were lower because of the delayed launch of new EV chargers by customer. The customer also lost market share as a result of keen competition. Sales of home appliance held steady. I will now turn over to King for the rest of the presentation.
Thank you, Andy. Good afternoon, ladies and gentlemen. Group revenue in Asia Pacific increased by 0.6% to $317 million. Lower sales of ELPs and telecommunication products were offset by increase in CMS. The region accounted for 14.8% of group revenue. ELP's revenue for the region decreased by 11.3% to $70.4 million. Higher sales in mainland China were offset by declines in Australia and Japan. In mainland China, both online and offline channels posted sales increases. Growth was driven by core learning products and a revamped Go! Go! Smart Wheels lines. Sales in Australia decreased for both VTech and branded products as consumer sentiment was dampened by unrelenting inflation and high interest rates. Despite this, VTech maintained its number one position in the infant and toddler toys category.
In Japan, sales were weighed down by reduced sell-through of smartwatches jointly developed with a local partner and by lower shipments to a major toy retailer. Telecommunication products revenue in Asia Pacific decreased by 25% to $21.3 million. Sales were lower in Australia, Japan, and Hong Kong. In Australia, both residential phones and baby monitors reported declines. In Japan, sales of residential phones to an ODM customer fell due to over-inventory. In Hong Kong, sales declined for IADs and residential phones. CMS sales in Asia Pacific grew by 8.7% to $226 million. It was driven mainly by DJ equipment. The CMS facilities in Malaysia also benefited from strong demand growth from existing customers seeking supply source diversification. Medical and health products declined on lower sales of diagnostic ultrasound systems, resulting from over-inventory. This was compounded by delay in a new product launch. Communication products also dropped.
Sales of marine radios were down as customers moved some production back in-house to Japan, following weakness of the Japanese yen. Finally, other regions, which comprises Latin America, the Middle East, and Africa. Revenue fell by 29% to $17.1 million, due primarily to lower sales of ELPs and telecommunication products. Other regions accounted for 4.8% of group revenue. ELPs revenue decreased by 17.1% to $8.7 million. All three regions reported lower sales. Telecommunication products revenue was down by 38.2% to $8.4 million. Sales declined in Latin America, the Middle East, and Africa. CMS revenue in other regions is immaterial. This concludes our operations report. Before sharing our outlook, we would like to share a few comments regarding our recent acquisition.
On April 5th, 2024, we completed the asset acquisition of Gigaset Communications GmbH, a German brand with over 30 years history and a global leader in communications technologies. These assets were related to the development, production, and sales activities of Gigaset's businesses in DECT phones, business telephony solutions for enterprise customers, and Android-based smartphones. The preliminary purchase price was EUR 27.5 million. The transaction was funded by internal resources. This acquisition is highly complementary to VTech's telecommunication products business. In residential phones, Gigaset is the market leader in DECT phones in Europe, whereas VTech is the number one supplier in the U.S. Following this acquisition, VTech is elevated to global leadership in this category. In commercial phones, Gigaset's product range focuses on multi-cell systems, complementing Snom's desk sets. As for Gigaset's smartphone products, they extend VTech's business to a completely new area.
Gigaset has a comprehensive sales network covering all European markets, complementary to VTech's strength in North America. The acquisition gives us our first manufacturing facility in Europe through Gigaset's highly automated factory in Bocholt, Germany. This is augmented by R&D facilities in Germany and Poland. We are confident in effectively integrating and unlocking the value of these new assets, thereby generating sustainable and profitable growth over the long term. Now to our outlook. Inflation and high interest rates continue to weigh on consumer sentiment and business investment in North America and Europe. At the same time, geopolitical conditions are increasingly uncertain. Despite these challenges, higher revenue is expected for the financial year 2025. ELPs will grow with the launch of new products, while telecommunication products will benefit from Gigaset's immediate contribution. CMS revenue is expected to hold steady.
Profitability is forecast to improve as a result of increased revenue, stable costs, and a more favorable product mix. Little change is expected for the cost environment in the financial year 2025. Owing to weak global demand, cost of materials is forecast to remain stable. Labor costs and manufacturing overheads are holding steady. There is currently little pressure for wage increases in Mainland China, and the renminbi remains weak. These factors will offset an increase in freight charges, which have already risen due to instabilities in routes through the Middle East. On to our three businesses. Driven by new product launches and enhanced merchandising management, the ELPs business is expecting revenue growth for both the U.S. and European markets. New VTech and LeapFrog products in the core learning categories, KidiZoom smartwatch, KidiZoom cameras, and the Magic Adventures line will drive growth.
In Asia Pacific, sales in Australia is forecast to stabilize. Positive momentum in Mainland China is expected to continue, with increases in both offline and online sales. Globally, in view of the challenging operating environment, our marketing campaigns will be even more targeted and our inventory management more stringent. With Gigaset's immediate top-line contribution, sales of telecommunication products is forecast to increase. Integrating Gigaset's businesses into our global R&D, procurement, manufacturing, sales, and marketing, as well as logistics operations, is our top priority for the FY 2025. Following the integration, the telecommunication products business will be organized into three categories, namely: residential phones, commercial phones and smartphones, as well as other telecommunication products. We target to complete the integration by the end of 2024. With the addition of the Gigaset brand, as well as the sales network covering all European markets, sales of residential phones will return to growth.
We will further expand the Gigaset product line, driving up its residential phone business and market share. For commercial phones, driven by new product launches, sales of Snom-branded commercial phones will increase. Gigaset's multi-cell systems will be augmented by Snom's SIP phones. Hotel phones will also contribute to growth as the positive momentum continues and VTech gains market share. Gigaset's Android-based smartphones, meanwhile, adds a new domain to our product portfolios. In other telecommunication products, building on the success of our first baby monitor with AI features, we will launch a second-generation version with additional advanced functionalities. CMS revenue is expected to stay stable. Facing economic uncertainties, customers have turned conservative in managing inventory and tight in placing orders. Sales of key product categories are forecast to remain stable. Growth is expected in smart energy storage systems as the customer is launching new products and gaining market share.
Sales of hearables will be negatively impacted by lower demand. To prepare ourselves for future growth, the drive to globalize our production base will continue. Due to strong demands from existing customers, we plan to increase the manufacturing space at our current Malaysian facilities. In Mexico, the factory is on track to offer full turnkey EMS capability commencing June 2024. We will also begin assessing the implementation of Industry 4.0 in our Malaysian and Mexican facilities. Thank you. This concludes our presentations. We turn now to your questions.
Thank you, King. For our online participants, if you wish to ask any questions, please use the raise hand feature in Zoom and make sure your camera is turned on. If you are invited to ask any question, please accept the prompt to unmute your line. We will start with the questions in the room. If you wish to ask a question, please raise your hand and we will pass a microphone to you.
Thank you, management. Congratulations on the earnings, and also very considerate with the dividend for the final year. I actually have a few questions in mind. I can see that CMS continued to be the growth driver for the group, but we are expecting that revenue to stay stable for the coming year. Just want to get a comment from the management. Is it because of capacity constraint, or is it because of just a very stable demand that we are seeing from the order book? That is my first question. Thank you.
Andy?
Yes, the major growth of Contract Manufacturing Services in FY 2024 was mainly due to the clearing of the backlog order as a result of the improvement in global supply of electronic components. For the FY 2025, we forecast the performance will be stable just because after clearing the backlog order, most of the customers, they have substantially built up their inventory. At the same time, we have a few customers still being affected by the post-COVID situation. During COVID, the hearable headset, they benefited from the work-from-home situation, so they improved their revenue during COVID. But right after COVID, it returned back to normal. Another customer comes from professional audio. Their home use audio interface device also benefited from the work-from-home situation. But right now, once COVID is over, their performance is also back to normal.
This is, in other words, after going for last year due to the clearance of the backlog order, everything will just be back to the normal situation.
Thank you. Just a follow-up question on the CMS then. Is there a figure that we have in terms of utilization of the capacity of the CMS group? Where are we at? We are not at 100% yet, right?
On the overall capacity at CMS, we are at around 75%, and we have additional capacity in both Mexico and also Malaysia. As a result of the geopolitical situation, I mean the tension between U.S. and China, a few customers, they are requesting production transfer from China to overseas. We have excess capacity in China at the present moment, and those are capacity in Malaysia and Mexico, they are newly built, and we still have plenty capacity over there. In the near future, I cannot see there is any constraint in capacity.
Okay, that is very good to know. My second question is about the group outlook. I see that we expect the profitability to improve, but if we are really looking at the cost, everything seems to remain stable. I want to get more color in terms of where that profitability the company is seeing. Where does it generate it from?
Maybe I can ask Ms. Shereen to perhaps give you some color.
In our FY 2024 financial year, the GP margin actually has already improved from 28.3% to 29.6%, which is an improvement of 1.3 percentage point already. In the coming year, we also can see that the material prices continue to decline, and the renminbi also continue to depreciate against the U.S. dollar. These are the major reasons why we expect the coming years, our profitability will continue to improve or at least keep a stable trend compared with the FY 2024 financial year. Yeah.
Okay. That is very clear. Sorry, my last question is regarding the Gigaset. I see that Gigaset also have a product line of smartphone. Is it possible you can have a disclosure on, for example, how many units of smartphone they have shipped out or they have sold prior to our acquisition? Is there such a figure?
No. Okay, maybe I can answer this question. We normally don't disclose individual smartphone figures. The smartphone Gigaset is focusing on is on some vertical markets. Vertical in terms of commercial, basically commercial applications and business-to-business applications, where they need specialized smartphones like waterproof, ruggedness, and replaceable batteries. We will continue to focus on this vertical market. The business is not huge, but there we see that there are quite a bit of potentials in growing this business.
Thank you. Congratulations again
Thank you.
The second question, yeah, come from Eric Lau from Citi.
Thank you. Thank you management, for the presentation and really appreciate for the generous dividend distribution. Can I have a couple of questions about TEL? The first one is, you mentioned you expect the positive growth for the TEL sales in FY 2025, but mainly because of Gigaset. But if stripping out Gigaset, in terms of the organic growth, do you expect positive growth? That is number one. Number two is, can you remind us why the commercial phone down significantly in FY 2024? Because of the corporate capacity cut under the economic slowdown or just the channel destocking? Because I would like to gauge how long is this down cycle. Now, do you see the sales recovery, say, for the first half FY 2025, based on the order? I mean the commercial phone. Yeah. Because I also follow Yealink.
Actually, they post very strong first Q sales growth because of the end of China destocking in last year. So I do not know whether you also get the same momentum, for the commercial phone. Sorry, last one for the phone is, we see the Gigaset, the EBITDA margin pretty thin, right? Say in FY 2023 or even the recent year. My question is, I know last time over the briefing, you said you probably keep the manufacturing facilities for Gigaset. But how you guys can turn around or improve the margin, like what VTech is delivering for TEL segment right now. How to improve the margin going forward for Gigaset. Thank you.
Yeah. Maybe I can answer your question. Maybe Ms. Shereen can supplement. Our telecommunication division mainly focus on two things. One is residential phones, which is a structurally declining market, and the other is new businesses, which consists of commercial phones and baby monitors. Because our residential phone still accounts for a large part of our total business and is declining double digits per year. So our total telecom business is declining. Our idea, of course, is to have the growth in the commercial and new businesses to offset the decline in the residential phones. But because of the decline is higher than what we have expected, and the growth in the new businesses is not as high as expected, so overall, telecommunication is still in a decline. Of course, with the consolidation of Gigaset's businesses, it would immediately have a boost in the revenue.
In the residential phone side, which is also the majority of the Gigaset business for the time being, we will immediately become the world leader. Also, we can help grow that part with the business of Gigaset because of the cost structure of Gigaset. They are not able to compete on certain markets and certain product areas. With the help of VTech, they can go into those areas where in the past they cannot. On the commercial side, they are the leader in commercial, in the area of multi-cell. On that part, it complements our commercial phones in that we can help to increase the sales of those by complementing with the Snom's desk sets. As to how we can improve the margin of Gigaset's because they are losing money, why we can actually make the business profitable, I think in several areas.
One, as I said earlier, we can go into areas that Gigaset is unable to go into because of their cost structure. Second thing is on the procurements, because now that they are integrating with the VTech procurement and the quantity is much higher, so we can get a more favorable pricing on the procurement. Also, on the third is on the cost structure because of the organization structure, because a lot of the infrastructure can be simplified and streamlined because of the consolidation with VTech. So we will expect Gigaset to immediately contribute to the profitability of the total telecom division for the first year. Maybe if Ms. Shereen have anything to supplement on this point.
Yes. Say for example, for the raw materials. When we compare Gigaset's purchase price for the raw material with ours, we can already see quite a good savings if we use our own, say, procurement resources to buy the same kind of materials. At the same time, as what we have announced when we acquire the Gigaset business, we have already done the restructuring before acquisitions. That means around, say, one third of their headcount has been reduced. Originally, globally, they have around, say, 800 employees, but right now, right after acquisitions, their number of employees go down to around, say, 500 people. So this is also a fact or will help us to improve the profitability after the acquisition.
Sorry. May I have a follow-up question about ELP segment. Actually, you see the platform product sales actually also decline in FY 2024, which contrasts with a positive growth of a standalone product. So I am a bit concerned over the growth trend for the platform. So, what is your view in the long run? Because probably this is because of, I do not know, maybe the tablet competition or other AI learning device, something like that. So how you think about your growth momentum of the platform going forward, say, in coming two to three years? Thank you.
I think you are right, Eric. Platform product gets more and more difficult as so much contents are now being consumed by even very small children on smartphones, on tablets. We continue to work very hard. If we look at some of the recent products, although we have not been able to push a lot of contents to generate revenue, the hardware actually gives us very good incomes. Even at this depressed stage, we are still selling a fair amount of tablets, believe it or not. There are parents who would like tablets who are being fenced in certain way, protected for the children. The Globe. We will continue to work very hard on it. There is still an area that will never stop being our core competence, which is reading, especially with the acquisition of LeapFrog. Obviously, it was a long time ago.
The importance of reading that parents and schools put on the curriculum has not decreased. So, we are continuing to come up with new LeapStart products and other reading products, and new products are coming out every year. This year, no exception. Hopefully we are seeing a revival. AI, it poses both threats and opportunities. To a point in which AI becomes feasible to be embedded in the kind of hardware that goes into our platform products, then it will open up a big area for us.
Thank you.
Next question come from Louis Keung. Louis?
Yes. Regarding the Gigaset acquisition, are there still any fields left where VTech has no advantage vis-a-vis its competitors in telecom? That is my first question. The second is, the factory in Bocholt. What was the utilization under Gigaset, and where do you think you bring the utilization rate, say, as of end of this financial year? The third question is, the inventory you acquired from Gigaset. To what extent have you already liquidated this inventory, and how much can you liquidate?
Okay. I will answer your first two questions, and maybe Shereen can answer the inventory issue. First of all, the consolidation of Gigaset together with VTech gives us a lot of complementary advantage. It is actually too numerous to state everything here. But mainly, I think the brand value of Gigaset is very strong in the whole of Europe, particularly in Germany and the neighboring countries. So, the residential phone under Gigaset brand is very strong. Particularly, as I said earlier, if we can complement the Gigaset brand with additional product, like more cost-effective residential handsets. We are also planning to put other products under the Gigaset brand. For example, baby monitors is also an area that we are planning to put under the Gigaset brand because of the well acceptance of the brand in Europe.
It would give us a much quicker entry into the market than using the VTech brand. Secondly, Gigaset has a lot of technology knowhow that VTech, at this point in time, do not have, like software developments in the design of their multi-cell products in which they have a lot of knowhows over the years. We believe that together we can enter into new markets in which VTech alone cannot enter.
We can complement the Gigaset with cost-effectiveness. So we have the best of both worlds. Gigaset brand and Gigaset technology together with the cost structure of VTech. Second thing is as to the factory utilization. The factory is highly automated. In the last couple of years, they have been producing residential handsets, almost the same number as VTech, but they use probably one-tenth of the number of workers. So there are certainly certain, of course, there are capacity limitations if we go to a certain level. But at this point in time, the utilization is at a very effective level, because the small number of labor involved and machines are almost fully depreciated. So, even if we are not fully utilized, I think the cost structure is still at a very favorable level.
Plus the automation technology they have in their factory, we are planning to bring to China to actually help automate our factory in China. We can actually utilize their manufacturing technology know-how as well. The third question regarding the inventory, I will let Ms. Shereen answer that.
Our preliminary purchase price for the Gigaset asset in total is about EUR 27.5 million. As I explained before, around 1/3 is related to the inventory. That means around, say, EUR 9 million. It is an inventory value we buy. Their net book value for those inventory is about EUR 25 million. Because when we assess their inventory value, at least we cut it by half, and then we assess based on their latest forecast and then historical sales number and come up with just EUR 9 million to buy EUR 25 million inventory. The inventory value is not so big because we have already paid a discount on those inventory value. Yep.
Yes. Of this EUR 25 million, how much is gone now?
Raw material is about EUR 18 million, and then FG is about 7.
The 18 should be consumed over this financial year, correct?
Yeah. The raw materials actually could be consumed, but when we buy it, we don't buy it based on the net book value because, as I said, we cut it by half when we assess the value. Those kind of raw materials and FG actually can be consumed during the year. But when we assess it, first we will say, "Oh, we can't see your sales forecast, we need to cut it based on the accounting standard.
Yeah.
Yeah.
The finished products, could they be sold?
Finished product is talking about EUR 7 million , the net book value, but the purchase price is talking about just around, say, EUR 2 million- EUR 3 million only.
Yeah. The seven-
Yeah. These are also sellable products
are gone.
Yeah.
Okay. Thank you, and congratulations.
Is there any question from the online viewers?