Gigaset systematically implements strategy and launches innovation drive with “Gigaset elements"

  • - Further expansion of market share in 2012 in a tough climate by two percentage points in terms of units and revenue
  • - Consolidated revenue from continuing operations €419,6 million (2011: €458.6 million)
  • - EBITDA from continuing operations € –5.8 million due to non-recurring special effects for restructuring and investments in new business segments (2011: €51.5 million)
  • - Given the anticipated positive impact of the cost-cutting program, a positive EBITDA well up on the previous year is expected again for 2013
  • - Innovation drive announced for 2013
  • - CEO Charles Fränkl: “In 2012 we initiated our transformation into a digital company. The focus in 2013 is on implementing our ‘Gigaset 2015’ strategy. Thanks to the launch of ‘Gigaset elements’ and new Android-based products, we will take a further large step to creating a broader portfolio and improving our profitability.”

 

Munich, March 28, 2013. Gigaset AG performed in line with its forecasts, continued to drive its “Gigaset 2015” strategy and so created a crucial foundation for profitable growth in fiscal year 2012. At the same time, 2012 was characterized by a sharp decline in the overall market in the company’s core business, digital cordless phones:

  • - Consolidated revenue from continuing operations in 2012: €419.6 million (2011: €458.6 million)
  • - EBITDA from continuing operations in 2012: € –5.8 million (2011: €51.5 million). Excluding non-recurring special effects for restructuring and investments in new business segments, the Group would have been able to post a positive EBITDA.
  • - Consolidated earnings from continuing operations in 2012: € –28.2 million (2011: €20.5 million)
  • - Free cash flow from continuing operations in 2012: € –33.1 million (2011: €23.7 million) 

 

Further expansion of market share in a tough market

The overall market for cordless phones in Europe declined sharply in 2012, namely by around 13 percent in terms of revenue. At the same time, Gigaset was able to grow its market share in its core business of digital cordless phones in its focal European markets by two percentage points (by units) to 28 percent and by two percent (by revenue) to 34 percent. 

Growth was slightly above-proportionate in the focal markets of the UK and Russia, which are of particular strategic importance for Gigaset and where Gigaset recorded double-digit revenue growth. 

In the fourth quarter of 2012, Gigaset AG again won market share in the markets observed by it, even though the overall market declined sharply.

  • - Consolidated revenue from continuing operations was €123.5 million in Q4/2012 (Q4/2011: €142.5 million)
  • - EBITDA from continuing operations was € –5.5 million in Q4/2012 (Q4/2011: €11.1 million)
  • - Consolidated earnings from continuing operations in Q4/2012: € –13.3 million (Q4/2011: €6.4 million)
  • - Free cash flow from continuing operations in Q4/2012: € 4.0 million (Q4/2011: €16.5 million). 

 

“Given the fact that we initiated restructuring of our company last year, revenue and operating income are in line with our expectations,” said Gigaset’s CEO Charles Fränkl. “Thanks to our continuing increase in market share, we see ourselves as being a winner from the consolidation of our core market. Our measures to increase efficiency are having a clear impact. We are fully on schedule to achieve our ambitious goal of permanently cutting costs by €30 million a year.” Gigaset AG has already secured more than €12 million in permanent savings for 2013 from personnel measures alone. The whole cost-cutting and efficiency program, which also comprises reducing non-personnel and service costs, will unfold its full impact in 2014. In addition, Gigaset is currently reviewing its profitability in markets outside Europe in order to further improve its results of operations.

Innovation drive in 2013: “Gigaset elements” to be launched in Q2. New Android products.

Gigaset AG will launch its new connected home solution “Gigaset elements” in the second quarter of 2013. “In 2012 we initiated our transformation into a digital company. The focus in 2013 is on implementing our ‘Gigaset 2015’ strategy. Thanks to the launch of ‘Gigaset elements’ and new Android-based products, we are embarking on an innovation drive and will take a further large step to creating a broader portfolio and improving our profitability. With ‘Gigaset elements’, we’re extending our business model as a hardware vendor to include the dimension of an Internet service provider, which will also open up opportunities for new business models. The launch of Android-based products will offer greater convenience for users who are accustomed to smartphones, cut development costs and enable faster product cycles,” stated Fränkl.

“Gigaset elements” is a sensor- and cloud-based solution for home networks. Cutting-edge sensors are combined with each other and linked with an Internet-capable DECT ULE base station and a secure Web server. That permits a large number of applications in the home. The intelligent, learning system will be able to be extended in a modular fashion. At a price of less than €200 for a Starter Kit, the system is intended to be suitable for the mass market.

According to a study by Strategy Analytics, the market for smart home systems & services (SHSS) in Western Europe has a highly promising future. According to it, the number of connected homes is expected to increase from 5.8 million in 2012 to 33 million by 2017. That gives technology and service providers new opportunities for expansion in the SHSS arena. Whereas just three percent of all Western European households could be classified as “smart homes” in 2012, that figure is anticipated to reach 18 percent by 2017. The market research institute expects the sales potential to triple to around USD 10 billion in the next five years.

Quick and rigorous restructuring of the company

In order to help it shape increasing consolidation in its core market, Gigaset AG restructured itself in 2012 by means of its cost-cutting and efficiency program. As part of the new “Gigaset 2015” strategy, it extended its business model to include the growth areas of business customers and solutions for home networks. Its core business was pooled and supplemented in the “Consumer Products” unit. All of the new units will operate with a strong entrepreneurial mindset and thus have the freedom they require to be successful in their respective markets. As a result, the company’s competitiveness should be strengthened and future growth enabled. A new Product Center was established in Düsseldorf in January 2013 and underscores Gigaset’s new setup. It is intended to create significant increases in efficiency thanks to an optimized geographical lineup for the three Business Units of Consumer Products, Business Customers und Home Networks.

Outlook

The measures required to ensure long-term growth were initiated in 2012. To counter the continuing difficulties in the company’s core market, investments in establishing new, promising business segments and product groups are required. Gigaset AG therefore expects from continuing operations in the current fiscal year:

  • - A further decline in revenue in its core business in a high single-digit to low double-digit percentage range.
  • - Given the anticipated positive impact of the efficiency program, a positive EBITDA well up on the previous year is expected again.
  • - A negative free cash flow in the middle double-digit million range due to the required investments.

 

For 2014, Gigaset AG expects initial and significantly positive effects on revenue, earnings and cash flow from establishment of the new business segments. The company therefore assumes that its revenue from continuing operations will grow and its EBITDA will improve further in the course of 2014.

Overview of development of the Business Units

Consumer Products

As the innovation driver in the field of DECT-based cordless phones, Gigaset AG won various awards in the past fiscal year for the new SL 910 touchscreen phone it launched in 2011. For example the SL 910 was voted “Product of the Year 2012” by readers of the telecommunications magazine “connect” in the cordless phone category. Overall, Gigaset products occupied the first five and eight of the first ten positions in connect’s list of top cordless phones. According to the Society for Consumer Research (GfK), in the fourth quarter the SL 910 ranked third in terms of revenue in the European markets observed by Gigaset1

The portfolio of Gigaset cordless phones was again expanded successfully in 2012 to include a large number of innovative models. For example, four models of the A series (the A 120, A 200 A, A 220 and A 220 A), the cheapest DECT phone family ever manufactured in Germany, were launched in April. According to the GfK, the A 120 currently has a position among the top 10 in the markets observed by Gigaset1. The first cordless hybrid phone, the S 820 and S 820 A, that can be operated by touchscreen and keys was launched at the end of August. The product came top of connect’s rating in the fixed-network phone category and was given the test verdict “Very good.” Gigaset won the prestigious “if Design Award” for the design of its C 620/C 620 A family phone. The product will come on the market in the second quarter of 2013. 

The high rate of innovation and constantly high quality (“Made in Germany”) of Gigaset’s products mean the company is able to lessen the impact of the general decline in prices. Gigaset still achieves an average selling price of €9 more than the competition and so is successfully holding onto its premium position. 1 

In line with its strategic restructuring of core business, the company also launched a new technology platform for delivering competitive Android and IP products, yet reducing development costs. With its Android-based SL 930 full-touch phone, Gigaset is planning to set new standards when it comes to blending innovative technology and outstanding design in the fixed-network arena. The prototype was already presented at the Consumer Electronics Fair (IFA) in Berlin in September 2012 and is expected to come onto the market in the summer of 2013.

Business Customers

Following the launch of the Business Customers unit in 2011, Gigaset AG has been able to establish it as a second important pillar. The “pro” product line grew its revenue by around 50 percent year on year in 2012. As part of its business outside Germany, Gigaset has identified strategic target markets such as the UK and Russia and successfully continued tapping them. The result is a significant rise in revenue in the middle double-digit percentage range in these markets and a perceptible increase in market share. A further focus was on expanding cooperation with sales partners and value added resellers. Apart from countries that the company has already tapped – Germany, Austria, France and the Netherlands –, it was able to expand its activities in Italy, Spain, Switzerland, Austria, Poland, the UK and the countries of Scandinavia. As part of that, the number of distributors and resellers has been doubled. 

The Business Customers unit was also able to extend its range of products. The multi-cell DECT solution launched in the spring of 2012 enables cordless calls anywhere on the company campus. The abilities of the systems were enhanced even further and operation of them simplified at the same time thanks to the free software update.

At the Consumer Electronics Fair (IFA) in Berlin at the beginning of September 2012, Gigaset AG presented “Maxwell,” the prototype of a new Android-based, tablet-like business phone that boasts an innovative videoconference feature and a generous 10.1” multi-touch display. Its market launch is scheduled for the fourth quarter of 2013. 

Home Networks

Likewise at IFA, Gigaset AG presented the youngest pillar in its new strategy, the Home Networks segment. In this connection, Gigaset premiered concrete concepts for the new “Gigaset elements” product line: Leading-edge sensors that, linked with an Internet-capable DECT ULE base station and a secure Web server, enable a large number of applications in the home. Future application areas for “Gigaset elements” are in the areas of security, energy management and maintenance, for example. The first products in this segment are scheduled to be launched in the second quarter of 2013.

Gigaset AG, Munich, is an internationally operating company in the area of communications technology. The Company is Europe's market leader in DECT telephones. The premium supplier ranks second worldwide with around 1,400 employees and a market presence in about 70 countries.

Gigaset AG is listed on the Prime Standard of Deutsche Börse and thus is subject to the highest requirements for transparency. Its shares are traded on the Frankfurt Stock Exchange under the symbol 'GGS' (ISIN: DE0005156004).

Contact:

Gigaset AG

Stefan Zuber,
Corporate Communications
Phone: +49 (0)89 444456-866
info.presse@gigaset.com  

Kerstin Diebenbusch,
Investor Relations 
Phone: +49 (0)89 444456-937
info@gigaset.com

 

Overview of the figures:

Jan. 1 – Dec. 31, 2012 Jan. 1 – Dec. 31, 2011
EUR thousand Continuing operations Total Continuing operations Total

Consolidated revenue

419,557

 

437,244

458,569

 

520,551

Earnings before interest, taxes, depreciation and amortization (EBITDA)

-5,833

 

-6,694

51,455

 

50,859

Earnings before interest and taxes (EBIT)

-30,677

 

-33,473

24,846

 

21,999

Consolidated net income/loss

-28,162

 

-30,692

20,537

 

17,541

Diluted earnings per share in €

-0.56

 

-0.61

0.41

 

0.35

Free cash flow

-33.085

 

-32.948

23.711

 

22.466

 

 

 

€ thousand

31.12.2012

31.12.2011

Balance sheet total

293.986

311.360

Equity 

45.204

76.233

Equity ratio in %

15,4

24,5

 

1. The data is taken from surveys by the Retail Panel for Cordless Phones of GfK Retail and Technology GmbH in Austria, Belgium, France, Germany, Italy, the Netherlands, Poland, Russia, Spain, Switzerland, Turkey and the UK. Survey period: 2012; base: GfK Panel Market.

2.Strategy Analytics: Smart Home Strategies – Forecast and Ecosystem Update US and Western Europe; June 2012

3. connect, issue 11/2012

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