Good afternoon, ladies and gentlemen. Today, Vtech Holdings Limited is announcing its annual results for the financial year end, the 31st of March 2021. This year, again, we are holding the presentation by live webcast from our head office in Hong Kong due to social distancing measures. Let me introduce the management here. Mr. King Pang, Executive Directors and Group President. Mr. Allan Wong, Chairman and Group CEO of Vtech Holdings. Mr. Andy Leung, Executive Directors 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. Mr. Pang will then give the management outlook for the coming year. We will have a Q&A session after the presentation. Now, may I invite Ms. Tong to open today's presentations. Ms. Tong, please.
Thank you, Grace. Good afternoon, ladies and gentlemen, and all viewers online. First of all, I would like to share with you the financial highlights of the group for the year end the 31st of March 2021, compared with the same period of the last year. As you see from the slide, the revenue of the group rose by 9.5% to $2,372.3 million. The increase in revenue was mainly driven by the higher sales in North America, Europe, and Asia Pacific, which offset the decrease in revenue in other regions. The gross profit of the group rose by 9.5% to $726.6 million. As for the gross profit margin, it was 30.6%, same as the last financial year.
The increase in material prices in the fourth quarter of the financial year, change in product mix, higher direct labor cost, and rising freight charges offset the lower manufacturing overhead and the benefits from the further productivity gains. Our operating profit rose by 21.2% to $266.2 million and our operating profit margin also improved from 10.1% to 11.2%. The increase in both operating profit and operating profit margin was mainly due to the improvement in gross profit, which offset the increase in total operating expenses. Operating profit for the year also include a fair value loss of $1.5 million on an investment in a company that designs and distributes integrated circuit products as compared with a fair value gain of $5.9 million in the same period of the last year.
Government subsidies of $5.7 million received from various country in response to COVID-19 were also recorded in the financial year 2021. Our profit attributable to shareholders rose by 21.1% to $230.9 million and our net profit margin also increased from 8.8% to 9.7%. As a result, our basic earning per share rose by 21% to 91.6 US cents and our board of directors has proposed a final dividend of 40.74 US cents, bringing the total dividend per share to 91 US cents, an increase of 71.7% compared to the last financial year. Turning to the revenue by region, North America was the second-largest market of the group, accounting for 41.9% of the group's revenue. Our sales in North America rose by 0.6% to $995.1 million.
The increase in revenue was mainly due to the higher sales of our electronic learning products and telecom products, which offset the lower sales of our Contract Manufacturing Services. As for the European market, it became the largest market of the group for the financial year 2021, accounting for 45.8% of the group's revenue. Our sales to European market rose by 22.6% to $1,086 million . The increase in revenue was mainly due to the higher sales of our electronic learning products and Contract Manufacturing Services, which offset the lower sales of our telecom products. In Asia Pacific region, the revenue of our group rose by 3.5% to $268.4 million . The increase in revenue was mainly due to the increase in sales of our telecom products and Contract Manufacturing Services, which offset the lower sales of our electronic learning products.
Other regions include Latin America, Middle East, and Africa. The gross revenue in other region reduced by 25.5% to $22.5 million . It was due to the decrease in sales of all our three product lines. Our stock balance as at March 31, 2021 increased from $372.6 million to $414 million compared with the same period of the last year. Our stock turnover days increased slightly from 102 days to 103 days. The highest stock level was mainly due to the increased demand for the group's product in the first quarter of the financial year 2022, and the stock up of raw materials in view of the unstable supply for the group's products. Our trade debtors balance as at March 31, 2021 increased from $221.5 million to $270.7 million .
Our trade debtors turnover day, however, shortened from 63 days to 61 days. The higher trade debtors balance was mainly due to the increase in revenue in the fourth quarter of the financial year 2021, compared with the same period of the last year. Our financial position remains very strong. We were debt-free and our net cash balance as at March 31, 2021 increased from $242.5 million to $343.8 million compared with the same period of the last year. The increase in net cash balance was mainly due to the increase in cash generated from operating activities, lower dividend payment, and the favorable foreign exchange movement on the group's net assets as a result of the appreciation of the foreign currencies against USD during the financial year. That is all of my presentation.
I will now invite Mr. Andy Leung to share with you our operations review. Mr. Leung, please.
Thank you, Shereen. Good afternoon, ladies and gentlemen. I will now take you through the review of our operation, beginning with costs. The group gross profit margin in fiscal year 2021 was 30.6%, remaining unchanged year-on-year. The lower-than-expected gross profit margin was due to a marked increase in material prices in the last quarter of the fiscal year, change in product mix, rise in freight costs, and higher direct labor costs. These increases offset lower manufacturing overheads and a further improvement in productivity for the full fiscal year. The strategy to expand our manufacturing base took a strategic step forward during the year with the acquisition of a production facility for professional loudspeakers in Querétaro of Mexico. The acquisition of QSC Mexican manufacturing facility was funded through internal resources and completed on April 1st, 2021.
It not only adds a new product category to Vtech Contract Manufacturing Services, but establishes a manufacturing base outside Asia, helping the business to serve its customer better. I am now turning to talk about the performance in each market. Group revenue in North America rose by 0.6% to $995.1 million in the fiscal year 2021. Higher sales of ELPs and telecommunication product offset lower CMS sales. North America became Vtech's second-largest market, accounting for 41.9% of the group revenue. ELP revenue in North America increased by 8.8% to $536.9 million, with good growth in Canada. The overall market recorded growth, and our sale to online retailer achieved a double-digit increase. We gained market share and strengthened our position as the number one manufacturer of electronic learning toys from infancy through toddler and preschool in the U.S.
In Canada, Vtech strengthened its leadership further and remained the number one supplier in the infants, toddler, and preschool category. Stand-alone products performed well. The pandemic expanded demand for electronic learning toys as parents and children spent more time at home. Growth in stand-alone products came from higher sales of both the LeapFrog and Vtech brands. The LeapFrog sales increase was especially robust. Preschool item also offers educational value, including Learning Friends 100 Words Book, 100 Animals Book, and two-in-one LeapTop Touch. Both achieved very good sell-through. With the Really Smart Handy Dandy Notebook selling particularly well, the Blue's Clues & You series of licensed product performed strongly. Sales of LeapBuilders, however, registered a decline. Vtech stand-alone product benefited from rising sales of infants and toddler products, Kidizoom camera, other Kidi line products, and Go! Go! Smart family of products. This increases, offset a decline in preschool products.
Sales of platform product in North America decreased slightly. At Vtech, platform products saw sales decline as higher sales of Touch and Learn Activity Desk were insufficient to compensate for a lower sale of KidiZoom Smartwatch and KidiBuzz. For LeapFrog, the platform product business posed an overall decline. Both the educational tablet and the Magic Adventures Globe saw sales increase, offsetting decline in interactive reading system and Rock-it reads. Subscription to the LeapFrog Academy increased substantially during the fiscal year 2021. Telecommunication product revenue in North America saw a 10.9% rise to $270.5 million. The growth was driven by higher sales of residential phone, commercial phone, and other telecommunication products. Sales to online retailer saw a strong increase. The residential phones market in North America, which had been on a downtrend, saw an uptick during the fiscal year 2021.
Consumers want to replace and upgrade their fixed-line telephone, as working from home became a norm. Both AT&T and Vtech brand phone recorded sales increase with super long range and connected-to-cell model performed especially well. In fiscal year 2021, Vtech strengthened its leadership position in U.S. residential phones market. The best performer among commercial phones and other telecommunication products in North America were also product geared to staying at home. Baby monitors performed especially well, boosted by strong demand of new series of Vtech high-definition smart Wi-Fi baby monitors. As a result, Vtech baby monitors strengthening its position as the number one brand in the U.S. and Canada. Headsets and the Careline range of residential phone also achieved higher sales. In contrast, SMB phone, hotel phone, and conference phone reported lower sales as they were all affected by the deep fall in business activity and travel.
These decreases offset an increase in sales of VoIP phone. CMS revenue in North America fell by 25.5% to $187.7 million. All product category post lower sales. Demand for commercial professional audio product fell deeply as COVID-19 measures restricted large public gathering in venues such as church and concert hall. This was compounded by one major customer experiencing an over-inventory. These factors contribute to sales decrease in this segment, offsetting increase in demand for professional audio equipment for home use. Sales of industrial products declines on lower order for coin and note recognition machine. Solid-state lighting saw sales decline as project-based bidding activity fell sharply due to the pandemic. Medical and health product saw lower sales on hearing aid as sales activity were significantly affected by the COVID-19 restrictions. Communication product recorded a sales decline as customer phase out their product range. Now moving to Europe.
Group revenue in Europe rose by 22.6% to $1 billion and 86.3 million in the fiscal year 2021, as higher sales of ELPs and CMS offset lower revenue of telecommunication product. Europe was our largest market, accounting for 45.8% of the group revenues. ELP revenue in Europe increased by 5.4% to $351.2 million. Growth slowed down in the second half as lockdown in the region forced closure of stores selling non-essential items. Geographically, sales increased in France, the U.K., Germany, and the Netherlands. Spain experienced decline. In the calendar year 2020, Vtech remained the number one infants and toddler toy manufacturer in France, the U.K., Germany, and the Benelux countries. In standalone products, both the Vtech and VFox brands achieved higher sales. For the Vtech brand, growth was led by electronic learning aids, Kidizoom camera, other Kidilized products, and Switch & Go Dinos.
This offset decline in two family of products. Sales of infants, toddler, and preschool products were largely stable during the fiscal year 2021. The Go! Go! Cory Carson curriculum vehicle and play set will roll out to the major European market in September 2020 under the name of Toot-Toot Cory Carson curriculum, which support the growth in standalone products. VFox saw rising sales of infants, toddler, and preschool products with strong sale of Learning Friends 100 Words Book and 100 Animals Book. This offset the declines for the LeapBuilders, which in Europe is called BlaBlaBlocks. Platform products saw lower sales as growth for LeapFrog branded product was insufficient to offset decline in Vtech branded products. For LeapFrog, the revenue increase was driven by higher sales of Magic Adventures Globe and interactive reading systems, which offset decline in Vtech Trust and children's educational tablets.
At Vtech, higher sales of Touch and Learn Activity Desk were unable to offset lower sales of children's educational tablets and the KidiCom Max. Sales of KidiZoom Smartwatch remained steady year on year. Revenue from telecommunication products in Europe fell by 2.8% to $109.3 million U.S. Higher sales of commercial phones and other telecommunication products were insufficient to offset lower sales of residential phones. In Europe, we sell residential phone to major telephone company on an ODM basis. The sale decrease was due to lower order from an existing customer. Sales of commercial phone and other telecommunication products increased. Stay-at-home restriction benefits sales of CAT-iq headset, the Careline range of residential phones, IADs, and headsets as consumer want to upgrade their communication device. As a result of order reduction of a major customer, baby monitor saw sale decline.
The cancellation of trade show and the shutdown in business activities also resulted in a lower order for VoIP phones, conference phone, and hotel phones. This was despite a gradual pickup in the second half as some business activity resume. CMS revenue in Europe rose strongly by 42.1% to $625.8 million U.S. Hearable medical and health products, home appliance, communication products, and automotive-related products saw higher sales, offsetting decline in professional audio equipment, IoT products, and switching mode power supplies. With demand for headset boosted by the need to work from home, hearable recorded the strongest growth. Order for this product were also boosted by customer moving production of its new version of true wireless headset to Vtech from the competitors. The home appliance business benefited from higher order from existing customers.
Sales of health and beauty products rise sharply under the pandemic, contributed the revenue growth of the medical and health product. This offset the decline in order for hearing aids. Communication products saw higher orders of Wi-Fi routers. Sales of smart battery chargers for the automotive industries improved due to the good market response to a new product launch by the customer. In contrast, professional audio equipment post lower sales as growing demand for audio interface equipment for home use failed to offset lower order for audio mixers and amplifiers. Although sales of internet-connected thermostat and air conditioning control were stable, the pandemic slowed down the installation of smart meters in U.K., negatively affecting IoT products. Sales of switching mode power supplies were lower as the customer transferred production back in-house following a change in ownership. We now turn to Asia Pacific.
Group revenue in this region grew by 3.5% to $268.4 million U.S. in the fiscal year 2021. Higher sales of telecommunication products and CMS offset lower revenue from ELPs. The Asia Pacific region representing 11.3% of the group revenue. Revenue from ELP in Asia Pacific decreased by 1.4% to $82 million U.S. Growth in Australia was offset by lower sales in Mainland China. With demand for educational learning toys rising as children spend more time at home due to the pandemic, Australia saw robust sales increase on strong sell-through of both Vtech and LeapFrog branded products. In addition, effective channel management drove online-to-offline sale higher, boosting growth in the country. In calendar year 2020, Vtech maintained its position as the number one manufacturer in the infants and the toddler toys category in Australia. In Mainland China, sales were lower, primarily due to a revenue decrease in offline channels.
In Malaysia, the group recognized a first full year sale contribution from its flagship store on lazada.com. Telecommunications product in Asia Pacific saw revenue increase by 13.6% to $31.7 million, driven by higher sales in Australia, Japan, and Hong Kong. In Australia, growth mainly come from the baby monitors, and Hong Kong saw higher sales of IADs. In Japan, order for residential phones increased at higher demand from an existing customer. CMS revenue in Asia Pacific grew by 4.3% to $154.7 million. Growth in professional audio equipment and communication product offset lower sales of medical and health product and home appliance. This came despite the production facility in Malaya had to shut down for several weeks in April because of the government COVID-19 movement control order.
Higher sales of professional audio equipment will mainly come from the increased sales of DJ equipment and the supplying of USB streaming microphone for a new online KOL customer. Sales of communication product rose on more order for marine radio as a new generation of product was launched. In contrast to this increase, medical and health product reported lower sales. This is because order for diagnostic ultrasound system declined as hospitals shift their budget to purchase COVID-19 related equipments. Sales of home appliance also decreased as a product reached the end of its product life cycle. Finally, group revenue in other region, comprising Latin America, the Middle East, and Africa, fell by 25.5% to $22.5 million in the fiscal year 2021. The decrease was due to lower sales at all the three businesses. Other regions accounted for just 1% of the group revenue.
ELP revenue in other region decreased by 30.6% to $8.4 million. Higher sale in Africa were offset by lower sales in Middle East and Latin America. Telecommunications product revenue in other region was down by 16.9% to $13.8 million. The decline was due to sales decrease in Latin America, which offset increase in the Middle East and Africa. CMS revenue in other regions was $0.3 million in the fiscal year 2021 as compared to $1.5 million in the previous fiscal years. I will now hand over to King for the outlook.
Thank you, Andy. Good afternoon, ladies and gentlemen. I would like to start with some updates on sustainability, which we are now integrating into all aspects of our business operations. First, people. With the COVID-19 pandemic affecting lives around the globe, Vtech's top priority has been, and remains, to protect the health and safety of our employees while going about our daily operations. This means strictly following local regulations and ensuring safe working environments at all our worldwide locations in compliance with government and World Health Organization requirements and recommendations. Vtech, together with our employees, has supported children and various local communities through making financial donations, providing free online learning contents, as well as handing out gifts of educational toys, phones, and baby monitors.
With our eyes on the future, we set out our pledge last year to replace fossil-based plastics in all our ELPs with sustainable alternatives by 2030. Later this year, we will mark an important first step towards this goal with the launch of a number of eco-friendly ELPs made with plant-based or reclaimed plastics. The launch will also include a wooden toy line made with wood sourced from responsibly managed forests, certified by the Forest Stewardship Council. These innovations open a new phase of the Group's contribution to building a better future for the children of today and tomorrow. Returning now to the more immediate future. First, revenue. The Group's revenue for the financial year 2022 is hard to predict. As it currently stands, all our product lines have solid order book.
However, the fluid situation in global material supply may impede our ability to meet this demand, despite our best efforts. Currently, there is a worldwide shortage of electronic components, especially in semiconductor and liquid crystal displays. Semiconductor foundries have been struggling to meet huge increases in demand. Not only are lead times much longer, order fulfillment has also been erratic. Despite our long-term relationships with suppliers and their full support, some of the Group's confirmed component orders are not being fulfilled on time. This uncertainty in the supply chain could limit our ability to meet orders. Gross profit. Gross profit margin for financial year 2022 is expected to decline. Gross profit margin will be impacted by material price increases, elevated freight costs, and an unfavorable renminbi exchange rate.
We have taken steps to mitigate these adverse factors, including supply source diversification, product re-engineering, shipment contract renegotiation, and judicious implementation of price increases. For ELPs, our focus is on maintaining positive momentum through global new product launches, plus the drive to resume growth in Asia Pacific. On platform products, for the Vtech brand, KidiZoom Smartwatch, KidiBuzz, and Touch and Learn Activity Desk will have upgraded new versions. For the LeapFrog brand, the LeapStart reading system will be updated with new titles and a new look for the console. Standalone products. For the Vtech brand, there will be additions to the Core Infant, Toddler, and Preschool ranges. The Kidizoom camera and Kidi line will be expanded. A new line of easy-to-construct modular Marble Rush electronic play sets, called Marble Rush, will be launched. The Go! Go!
Cory Carson line will be updated with new models, alongside new content launches on Netflix during the year. For the LeapFrog brand, the popular Blue's Clues & You line will be expanded. The best-selling Learning Friends 100 Words Book series will welcome its newest addition, the 100 Words About Places I Go. These new product launches will be supplemented by the aforementioned eco-friendly toys, a new series of role-play toys, as well as a new TV learning game called LeapLand Adventures. In Asia Pacific, driven by renewed focus on e-commerce and channel management, sales growth in mainland China is expected to resume. A slew of new products will be launched, notably a new line of Switch & Go Dinos based on the popular children animation series, Mini Force. In Malaysia, to augment our Lazada flagship store, a second Vtech official online store has been opened on Shopee.
Opening of additional Vtech official online stores is also in progress elsewhere in Southeast Asia. In telecommunication products, we aim to launch new products that cater for the continued demand for residential phones and other telecommunication products, as well as a recovery in the commercial phones market. Sales of residential phones will benefit from a series of new products, notably a new premium work-from-home desktop cordless telephone with five-inch color display, slated for launch in the second quarter of the financial year 2022. In unattended communication products, new Wi-Fi 6 IADs will be launched in the first quarter. These IADs provide enhanced performance and support dual wide-area network connection through 4G LTE. Also slated for launch is a new smart Wi-Fi baby monitor under the LeapFrog brand. It incorporates health monitoring features and an accompanying baby care app.
In commercial offerings, a new range of Snom products targeting work-from-anywhere users will be launched in the second quarter, driving recovery for the business sector. Meanwhile, consolidations in the hospitality sector will provide sales impetus to renew a series of handsets, propelling market share gains. Finally, CMS. As reported earlier, while seeing increased demands in most CMS product categories, our ability to meet these orders may be impacted by the critical global material supply situation. We have been, and will continue to work closely with customers and suppliers to manage these issues. The new manufacturing facility in Tecate in Mexico will contribute to CMS revenue in the financial year 2022 through producing QSC-branded professional loudspeakers. Utilization of the facility will rise gradually as new customers are added.
We will continue to add production capacities at our facility in Malaya, Malaysia, as more existing customers adopt the strategy of maintaining dual manufacturing sites. Thank you. This completes our presentation. We look forward to answering your questions in the Q&A session.
Thank you, King. That concludes our presentation. The first question come from Paul Simons of Python. Paul, please go ahead.
Hello there, everybody. Thanks very much for taking my question, and congratulations on the results. I just have two brief questions. I note that the acquisition of the facility in Mexico completed after the end of the financial year. Could you give us an idea of how much of the cash on the balance sheet would have been used to complete that? Then, assuming it wasn't $100 million, the cash is now fairly elevated, and it's mainly due to reducing the dividend last year, which I understand. But given you've now had two very strong sets of results since, at what point do you think that the amount of cash on the balance sheet is now too high? Thank you.
Thank you. Thank you, Paul, for asking this question. I think the cash required for our Mexico acquisition is not high. We decided not to disclose the amount at this point in time because the amount is not very significant.
Sure.
On your second questions, yes, we do reduce our dividends last year because of the uncertainty, because of the COVID-19 situation. But of course, as you can see from our results, it turns out that our results, despite the COVID-19 situation, has been quite good. Our cash at this point in time is over $300 million. As you can see, we have upgraded our dividend payout ratio to over 99%. As we have said in our past, that anything, when our net cash had reached a point of over $300 million, we will distribute all our profits back to shareholders. This is what we did this year.
I understand, but I guess the excess that was put onto the balance sheet last year will just stay there if you don't go above 100%, or do something as an alternative, then the cash won't fall unless you make significant acquisitions, I guess. Do you have others in mind?
The situation in the coming year is still quite uncertain because the COVID situation is still not over yet. I think it's too early for us to think that there's no challenges ahead, and on top of that, the component situation is quite uncertain. The shortage is actually the most severe that we have ever seen on the last 20, 30 years. Not only that the supply of semiconductor is short and also prices escalate. These are all the uncertainties facing us. I think we would like to see another year to see if the COVID situation is really completely over and our component situation is not adversely affecting us that much before we would decide what to do with our extra cash.
Okay, Mr. Wong. Thanks very much. I understand.
The next questions come from Tian Yuan. Tian, please go ahead.
Sure. Thanks for your update. Could you just give some color on the acquisition that you did in Mexico a month ago? For example, the price you paid, your reasoning behind acquiring this loudspeaker manufacturer. That would be much appreciated. Thank you.
I'll let Andy answer this question.
The acquisition, in fact, is acquiring a manufacturing facility for professional loudspeakers from one of our major customers, QSC. The factory is located in Tecate, Mexico, which is around a 20 minutes drive from the border of the U.S. The acquisition consists of mainly the acquiring of the fixed assets and also the manufacturing team, as well as the annual business of around $8 million-$10 million. The size of the factory is not so big. The size is around 3,000 square meters. Currently, its mainly product is the wooden electronic loudspeakers. We consider the acquisition is our first step to expand our global footprint outside Asia. In the long run, we are planning to expand the activity in the factory more than the professional loudspeaker. For example, we may consider to expand the manufacturing setup, including the EMS business.
Oh, yes. Sorry. One more, if that's okay.
Please go ahead.
Yeah. Thank you. On your sustainable products, I would be interested to know what kind of market research you conducted before looking into the launch of recycled plastics and things like that. Going forward, how much impact do you expect these products to have on your sales? Thank you.
The sustainable ELPs, they are essentially sold to all our markets around the world. They have been extremely well-received. We cannot make enough of them. Obviously, during the first year, the contribution is actually not very big. We are working on expanding the line, but I am sure you would appreciate that there are limitations on how much reclaimed plastic material that are saved that we can get to use. So there are some limitations. I cannot give you a quantitative number, but we definitely will be expanding the lines as well as the wooden toys in the years to come. In addition to doing very good business, they are very good for PR.
Okay. Fantastic. Thank you.
Thank you, Tian Yuan. The next question come from Timothy Lee of CLSA. Tim, please go ahead.
Thank you very much for taking my question, and congratulations for the results. Just two questions. One is about the current environment. As you mentioned that there are some distortion in terms of material supply, so that makes our revenue forecast unpredictable. May I just get a sense of which of the three sectors do you see the more impact from this kind of material shortage? In terms of the TEL in particular, we saw a quite good uptick in sales in FY 2021 because of the demand for the upgrade of the telephone systems by the residents. What do you see about the momentum going forward? Is it already end, I mean, that kind of transition? The momentum continues, or it is already the end of that kind of upgrade process?
Just want to get a sense about the orders and sales. The second question is about your acquisition in Mexico. I think it is already under operation, right? May I know about the profitability of this new plant? Is it profitable? How about comparing the profitability with China or Malaysia? That's all my questions. Thank you.
For the first question regarding the distortion of the supply of the raw materials, especially the IC, LCD, the electronic components. I can tell you that it affects all our three business units, all three product lines, mainly because almost all our products, no matter is telecom products, electronic learning products, and Contract Manufacturing Services products, we also need to have electronic components. So it affects all our three product lines. Regarding the order book, we can also share with you that as mentioned in the outlook of the group by Mr. King Pang, the order book is very good right now, but for all the three business units. The point is we have received the orders, but we are also struggling whether we have sufficient components to meet those demand.
It's not just talking about the shortage, but it's also talking about the rise in material prices. That's why in our outlook, even though right now as of today, we see the order book for the three product lines are pretty good and they are very solid. But we don't feel very comfortable whether we can meet all the demand, because of the global shortage in components, especially those electronic-related components. That's why we are still very conservative regarding our outlook in the coming financial year.
Maybe I can answer your second question regarding the residential phones market. As you can see from our results, the telecommunication division has gone back to a growth path after several years of decline. Primarily because the residential phone market has actually declined less. It is still declining, but declining less due to the work from home environments, that people are buying more residential phones for them to work in their homes. Coupled with our gain in market share, you can see that our residential phone sales has actually gone up last year. As to the market going forward, we still believe that the residential phone market is a structural decline, although it may decline less, again, because of the lockdown and the work from home situation. We will continue to gain market share.
Whether we will continue to grow sales in this segment, we will see. We will definitely be performing better than the market. What is your third question?
Yeah. The last question was about the Mexico plants that you just acquired. How about the profitability of this plant? It is making profit or loss-making, and how about comparing with China or Malaysia?
Maybe Andy can answer that.
I think it's still early to talk about the profitability in the newly acquired facility in Mexico. At least based on what we can figure out, based on those figure on hand, the profitability in the Mexican facility should be quite okay. When you're talking about the comparison between China, Mexico, and Malaysia, I would say the cost in China and Malaysia are more or the same, but that in Mexico will be a little bit higher.
Thank you, Andy. Is there any more question?
Yeah. That's all for me. Thank you.
Thank you. For the audience, is there any further questions? The next question comes from Luz Kim. Luz, please go ahead.
Yes. Thank you. Yes, congratulations to a very strong set of results. I am very pleased with the sustainability strategy of Vtech. The questions I have concern the toys. You have two questions. I was surprised that China has shrinking sales. The reason given is weak offline sales. To me, China is a typical online market. Is Vtech's offline business so big that online cannot compensate for offline? What is your strategy here going forward? The other question regarding toys is LeapFrog Academy. This is an ideal business line in an age of component shortages. Could you tell us how many subscribers do we have now? What type of growth do you expect in the new financial year? Other questions regard your gross profit margin.
You announced that we should expect a declining gross profit margin. What it means is that Vtech is not willing or not capable of passing on all its price increases to consumers. Why does Vtech choose to absorb some of the price increases for its raw materials and freight costs? Lastly, I see there is an increase in inventories. Does this increase also include an increase in components to address this shortage in the market? These are my questions. Thank you.
Thank you, Luz.
King Tate, Casino. Thank you, Luz. Your first question is about why we see a decline for online business even for toys in China. There's no other way to say it. We need to do a better job. We need to do the better job across the line, starting from products to the way we sell it, to revive our online business for us to survive, let alone grow our toys business in China. Should I also answer the question regarding LFA? Thank you again for your annual question, Luz. As you may expect, we saw very good growth of an Elevate subscription in 2020. It's a very high double-digit growth. The number of subscribers is again, a five-figure number. Like the way I answer it's a larger five-figure number, it's an even larger five-figure number that I said last year. You are absolutely right.
This is a business with no cost of materials. It's a business that we have direct interaction with the end users. It's a focus for us. Okay. Maybe I answer the second question, and then I let Shereen answer the third one. Well, of course, as you can see, we predicted the decline in gross margin because of the uncertainty in material cost, and also the appreciation of renminbi and also product mix issues. Now, as your question is why we can't pass on the price increase to our consumers, actually, we did raise our price. But we probably cannot raise the price to fully cover the increase in material costs because we have to look at the overall market, the affordability of our users, competition, whether they also raise the price, coupled with whether we want market share gain and we won't be raising prices to as much.
All these factors we have to take into account. Hence, the bottom line is we will not be able to raise the price to fully cover the increase in cost or the decrease in margins. Maybe I'll let Shereen answer the inventory question.
Yeah. For the inventory level as at March 31st this year, the increase is talking about 11% comparable to the same period last year. As I mentioned earlier, it's mainly because one of the reasons is that our increase in demand in the first quarter of the coming financial year. The second main factor is, as you have just mentioned, is because of the stock-up of the raw material because of the unstable supply. So that's why the inventory level is higher than the same period of the last year. Most of the inventory are actually current items, and they are active items, expanded for those raw materials.
I'll take a minute for correction. I'm sure, Luz, if you're here, you're throwing things at me. I understated. Last year, I told you that it's a six-figure number. Okay, this year is a much higher six-figure number. That's for paid subscribers. The total number of subscribers paid and unpaid is a multiple of that. So just make sure that I get the number right. It's a six-figure number.
Luz, any follow-up questions?
To understand better your China business, could you tell us roughly the split between online and offline as of today?
Offline is higher than online, which is also one sign of the problem. It should be the other way around.
Mm-hmm. This LeapFrog Academy, six figures means above 100,000 but below one million, correct?
Correct.
Okay. What type of growth do you expect now for the current year?
Well, the target that I set for the team is anything less than 100% is not satisfactory.
Anything below 100%?
Yeah.
So, as you said I understand correctly, we have a very substantial six-figure number now. Does this mean next year we are going to see seven figures?
I will keep it in suspense for a year and let you ask the same question again next year, hopefully face to face.
Well, if you could quickly give me a clue now, it will be better than next year.
I really cannot give you any more color on this. It's a very competitive market, Louis, first of all. Second, last year was a very extraordinary year. Suddenly, we have millions and millions of kids being locked at home, parents scrambling to find ways to both entertain and educate their children. Okay?
That situation is gradually fading away. But of course
we are more adept. We are putting bigger investment, we are putting higher focus onto this. Hopefully I have
good news to report in a year.
Okay, good. Maybe to give me a bit more comfort, you could tell me how many customer, what percentage of customers are you losing? What is your churn rate year on year?
Wow, you are an expert. Our churn rate is amazingly low. What is the benchmark, Louis?
The only thing I know is, say, Hong Kong mobile subscribers where a churn rate below, say, 5% is extremely good.
No, you don't get such low churn rate. Okay, for remote learning, especially this kind, the churn rate normally is in the high 10%.
60%-70% churn rate. The LeapFrog Academy churn rate is a fraction of that. So we have a good product.
A fraction of 50?
Yeah.
Yes. That's why I'm so interested.
Okay, Louis.
Okay.
Because of our time constraint, I think we need to end here. I would like to conclude our Q&A session here. On behalf of Vtech, thank you for your questions, and thank you for joining us today. Hope to see you in person in the next results announcement. Thank you.