Update | VTech poised for interim profit slump as takeover of rival remains under probe, analyst says
As Britain continues its probe into firm’s recent US$72m acquisition of US rival LeapFrog, one-off costs expected to hit half-time performance
VTech Holdings, the world’s largest supplier of electronic learning products, is predicted to post lacklustre earnings for the six months to September as its acquisition of rival LeapFrog Enterprises remains under investigation in Britain.
The company’s share price opened at a low of HK$90.05 on Tuesday, down from its close of HK$90.30 on Monday, but rallied in early afternoon trading to finish up 0.28 per cent to HK$90.55.
“We forecast interim profit to slide 29 per cent to US$71 million from US$100 million a year earlier,” said Citi Research analyst Eric Lau, the lead author of the report.
Lau said that estimate includes a one-off provisional charge for compensation due to the anticipated layoffs of about 200 staff at California-based LeapFrog, which VTech bought for US$72 million in April.
The senior management at VTech, also the world’s biggest supplier and contract manufacturer of cordless telephones, said they plan to retain only 100 of LeapFrog’s total 300 headcount for content development, software programming, and research and development, according to Lau.
Those to be let go are administrative, sales and so-called back office staff.
