Half-year figures 2016: Gigaset returns to profitability

Munich, August 11, 2016 - Gigaset AG is back in the black, reporting a positive income from ordinary activities (income before taxes) for 2016 of €0.6 million after a loss of €9.3 million in the previous year. EBIT  improved by €16.7 million to €1.4 million. In view of the good first half of the year, the Gigaset AG Executive Board is raising its forecast for the whole of fiscal 2016. “We now expect to make a positive income from ordinary activities for the entire 2016,” as Chief Financial Officer Hans-Henning Doerr reports, announcing an upward adjustment to the original forecast. The anticipated EBITDA is also being raised to approximately €20 million for the year as a whole. Accordingly, the company’s cash position for the whole of 2016 will hardly change year on year. If tax payments for previous years are excluded from the cash flow, the free cash flow will also be well in the black this year.

These financial figures are proof that Gigaset AG’s cost-cutting measures are having full impact. “We’ve adopted and rigorously implemented a large number of measures,” underscores Klaus Weßing. “And even if revenue per se fell further in the first half of the year, we nevertheless believe we have a good foundation for the future. We now have room again to press ahead vigorously with our strategic realignment.”

Key factors in this success are:

 

  • The gross profit margin was increased despite falling revenue, not least due to the fact that price increases were successfully pushed through and sales of higher-margin products rose. Individual regions were successfully returned to the black thanks to optimization of margins.
  • Sales is working to regain market share in the second half of the year. Personnel costs were cut as a result of successful conclusion of the collective bargaining agreement in the first half of the year. Employees have taken a pay cut of up to 10% since April 1, 2016. 
  • Further measures to cut costs include focusing on marketing expenses, cutting patent costs and IT costs, merging production into one hall at the Bocholt factory, as well as reducing consulting services and rental and leasing costs at the individual locations.

The Executive Board sees further potential to improve earnings in the further course of business from the following factors:

 

  • Revenue is traditionally stronger in the second half, mainly due to Christmas trade.
  • Further considerable cost savings will be achieved through the restructuring program. 
  • A raft of new products will generate further sales. An increase in revenue in the Business Customers segment is anticipated, in particular from the now fully available Maxwell portfolio. Gigaset now has a full-line solution offering for business customers in the shape of the Maxwell series – from phones for executives, the secretary’s office and all employees.
  • The company will press ahead with optimizing marketing of the security solution Gigaset elements in the second half of the year. The company expects a perceptible pickup as soon as sales and marketing are improved effectively at the right place.

The new Executive Board of Klaus Weßing and Hans-Henning Doerr has declared that one of its core tasks will be to formulate a sustainable corporate strategy. “We are convinced that Gigaset will grow again,” said Klaus Weßing with optimism. “Since we will also cut costs in 2017 as a result of staff reductions, we will gain further freedom to invest in our future.”

Gigaset is already working intensively on the following fields to create a successful setup for the future:

 

  • Gigaset is achieving a good contribution margin in DECT business thanks to the cost savings it has made and will win market share.
  • Gigaset sees significant growth potential in the field of business telephony and will further expand the Business Customers Business Unit, which will contribute €60 million in revenue in fiscal 2016.
  • Optimized marketing of the security solution Gigaset elements will achieve further sales successes.
  • Gigaset continues to work on new applications and solution offerings in the Smart Home segment that will offer growth potential.

The successful turnaround also means that the extremely important cash position for Gigaset AG has improved significantly. As expected, liquid funds were low in the first half for seasonal reasons and, at €27.4 million, were at approximately the planned level. However, the company serviced supplier loans early to an amount of €8 million and earned cash discounts. “Without these measures, our cash position would be around 30% above our original planned figures,” says CFO Doerr.

Gigaset is creating freedom to maneuver for the future with its successful restructuring measures. The company will now keep on working to operate closer to the market thanks to a raft of measures and also to invest in further growth in future-oriented segments.

The outlook for 2016 as a whole has been adjusted as follows. The company now expects:

 

  • a positive income from ordinary activities (income before taxes) for 2016
  • an EBITDA of around €20 million and
  • a positive free cash flow from business operations, which will be slightly negative solely due to tax payments from past years.

 

 

 

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