- Rigorous implementation of the operational realignment paying off
- Consolidated revenue of €281.9 million in what continues to be a challenging market environment
- Cost cuts are making an impact: The result from core business before depreciation and amortization increased by 136% to €25.0 million
- Positive free cash flow (€7.2 million) for the first time since 2011
- Positive outlook for 2017
Munich, April 21, 2017 - Gigaset AG (ISIN: DE0005156004), an internationally operating company in the area of communications technology, today published its 2016 Annual Report and confirmed the good provisional figures published on March 7, 2017. The presented figures clearly show that rigorous implementation of the operational realignment is paying off and that the company achieved its operational turnaround in the past fiscal year.
The operational turnaround is apparent from three aspects: Stabilization of core business, successful reduction in current costs, and creation of new freedom to invest on a considerable scale. Stabilization of core business was ensured by selective sales activities in its key European markets, which resulted in gains in market share in various countries, as well as by an improvement in the margins achieved. The first restructuring steps in 2016 are also reaping success in terms of costs. Once its restructuring has been completed at the end of 2017, the company will cut costs by a double-digit million euro amount per year. This aspect submits new freedom to invest, which the company mainly leveraged to create development capacities for new projects and subject areas that will be implemented successively in 2017 and the years after and will help grow revenue. Overall €10.0 million more than in 2016 will be invested. One priority is on further expansion and interconnectedness of cloud and internet based voice solutions.
Overall revenue trend
In what continues to be a challenging market environment, consolidated revenue declined by 7.7% to €281.9 million (previous year: €305.3 million), but rigorous implementation of the three-point plan launched at the beginning of 2016 with the aim of ensuring the company’s operational realignment and recovery in the medium-term managed to return it to profitability in the past fiscal year. The company was able to increase the result from core business before depreciation and amortization significantly by 136% to €25.0 million (previous year: €10.6 million) and generate a positive free cash flow of €7.2 million (previous year: minus €9.7 million) again for the first time since 2011.
“The figures prove that the operational realignment and our three-point plan are reaping success. We’re making money and achieving good margins, even in a tough market climate. At the same time, we’re working hard to expand our product portfolio and existing solutions so that we can hold our ground in the medium term and open up new revenue potential for the company,” said Klaus Weßing, CEO.
Revenue trend by Business Units
The Consumer Products segment generated revenue of €233.1 million (previous year: €249.7 million) in what continued to be a challenging environment. However, the company managed to win market share in numerous European countries in this segment and benefit from good end-of-year business in its home market of Germany. Market share in the key European countries of Germany, France, Italy, the Netherlands and Spain remains high at 39%. The Business Customers Business Unit posted revenue of €43.7 million (previous year: €46.6 million). Revenue from the “pro” product series the company markets under its own name was increased in 2016 by around 7.0% over the previous year, although there was also a decline in revenue from customer-specific products for business customers.
The Home Networks Business Unit recorded revenue of €1.9 million (previous year: €3.7 million), a decline that was mainly due to a stagnating market. The company responded to that by clearly positioning its Home Networks products with a focus on security. Mobile Devices generated revenue of €3.2 million following €5.3 million in 2015. This Business Unit was impacted by structural changes during the year, an effect that was adjusted at the end of the year by the decision taken on December 14, 2016, to expand Mobile Devices and cooperate with partners outside the Goldin Group.
The GS160, the first smartphone developed by the company itself, was launched on December 14, 2016.
Cost-cutting program has a broad-scale impact
Rigorous and sustainable implementation of the extensive cost-cutting program had a positive impact across all areas of the company. The company was able to return to profitability in fiscal 2016 by reducing personnel, administrative and other costs. In addition, the gross profit margin (the ratio of revenue minus cost of materials to revenue) was increased from 48% to 51% thanks to an improved product mix and better purchasing terms. The result from core business before depreciation and amortization increased significantly by 136% to €25.0 million (previous year: €10.6 million). Consolidated net income was €4.3 million (previous year: minus €22.0 million).
Positive free cash flow for the first time since 2011
The group’s total assets at the end of the fiscal year (December 31, 2016) are €221.7 million, around the level of the previous year (€221.1 million). Cash holdings were able to be increased sharply to €47.5 million (previous year: €41.0 million) due to the improvement in income and cost savings. The company achieved a positive free cash flow of €7.2 million (previous year: minus €9.7 million) again for the first time since fiscal 2011.
“The success of our cost-cutting program is not only reflected in our result from core business before depreciation and amortization and the improvement in our free cash flow,” stated Hans-Henning Doerr, CFO. “The restructuring program was also an efficiency program that, in conjunction with the company’s operational restructuring, has played a major part in creating synergy effects at the company, positive effects on our gross profit margin and a solid foundation for the investments to be made in 2017.”
The company will press ahead rigorously with its realignment. That means: winning market share in Consumer Products business, growing revenue at Business Customers, improving its market position in the Home Networks segment, and building and expanding its own smartphone business with Mobile Devices. The company will still focus strongly in 2017 on establishing new products and business segments and will increase its expenditure, mainly on marketing and investments. The company therefore expects for the current fiscal year:
- An increase in revenue over 2016 by a low double-digit million amount thanks to the restructured smartphone business.
- A result from core business before depreciation and amortization of between €15 million and €25 million. Operational performance will be impacted by a further decline in gross profit in the Consumer segment, an increase in gross profit in the Business Customer and Home Networks segments and an increase in expenditure on development and marketing.
- Due to the considerable investments and expenses for the social plan and provisions for risks from past tax audits for previous years, the company expects a negative free cash flow in the medium single-digit million range.