Forecast achieved in full, EBITDA and free cash flow surpassed
• Adjusted guidance for fiscal 2019 achieved in full
• Significant improvement in EBITDA and free cash flow
• Smart Home business segment grows sharply
• No reliable outlook for fiscal 2020 possible due to the ongoing coronavirus crisis
Munich, April 28, 2020: Gigaset AG (ISIN: DE0005156004), an internationally operating company in the area of communications technology, today published its Annual Report for the 2019 fiscal year, in which it fully achieved the expectations it had most recently announced. Consolidated revenue was €257.9 million and so below the level of the previous year, but earnings before interest, taxes, depreciation and amortization (EBITDA) and the free cash flow improved significantly. In particular, the Smart Home business segment posted sharp growth.
Consolidated revenue down year over year, sharp increase in earnings and free cash flow
Gigaset generated consolidated revenue of €257.9 million in fiscal 2019 (2018: €280.3 million). Earnings before interest, taxes, depreciation and amortization (EBITDA) were €28.5 million, 29 % up on the figure for 2018 (€22.1 million) and include non-recurring special effects totaling around €7 million.
One positive point to emphasize is that the quality of margins improved over 2018 even excluding these special effects. The free cash flow rose significantly to €1.2 million (2018: minus €24.1 million). Gigaset has thus fully achieved the expectations it announced in November 2019, namely revenue below that of the previous year and an increase in EBITDA and free cash flow.
Performance by business segments
Looking at the company from the operational perspective, the four business segments – Phones, Smartphones, Smart Home and Professional – are divided into two strategic solution areas: Phones and Smartphones relate to Voice Solutions, which generated total revenue of €197.6 million (9% less than in 2018), while Smart Home and Professional relate to Connected Network Solutions, from which revenue totaled to €60.3 million, a fall of 4% over 2018.
“We are thinking in terms of these two directions as we move forward,” said Klaus Weßing, CEO of Gigaset AG. “The traditional Phones segment has been enriched by mobile telephony solutions and will also be complemented by innovative products down the road. At the same time, the complex Connected Network Solutions business is very important for us. We have successfully accomplished one of the largest development projects in the company’s history here. We’re now also able to address the needs of enterprise customers and offer them a scalable solution.”
The Phones segment posted revenue of €176.4 million (2018: €193.3 million) in an unchanged market environment in fiscal 2019. The main revenue drivers remained products from the high-volume segment, in other words, A and C class phones. Gigaset was able to retain its leading position in the DECT base station and handset arena and, among other things, expand it in its domestic market of Germany in fiscal 2019. It aims to continue that trend in the medium to long term and keep on growing its market share.
Revenue in the Smartphones segment likewise fell slightly to €21.2 million (2018: €23.9 million). Gigaset presented five new smartphone models in fiscal 2019, including its first-ever ruggedized model for use in industrial environments. Smartphones “Made in Germany” remain a unique selling point that sets Gigaset apart from the competition, enabling greater customizing and more flexible production of the models. Gigaset will leverage this advantage to also play a more active role with smartphones in the enterprise customer segment in the future.
Connected Network Solutions
The Smart Home business segment performed pleasingly, increasing its revenue by 16% to €3.7 million in fiscal 2019 (2018: €3.2 million). Gigaset offers multi-faceted, tailored all-round solutions with its holistic approach and now caters for the areas of security, convenience, energy and care (ambient assisted living).
Revenue in the highly project-driven Professional segment fell slightly to €56.6 million (2018: €59.9 million). Gigaset operates in the market for professional telecommunications solutions with an innovative product portfolio of multi-cell systems, DECT-based cordless phones and non-proprietary IP desktop phones. Following the launch of its single- and multi-cell solution in 2019, Gigaset is now beginning to tap into the enterprise customer market, which will generate further growth.
The company had already made a number of assumptions with regard to various potential risks by the time the 2019 Annual Report had been prepared. The coronavirus pandemic was also an issue that was included in these considerations to a certain extent. However, the severity and scale of the crisis was far from evident at that time and so, with hindsight, that resulted in the fact that Gigaset – as published in the 2019 Annual report – anticipated the following financial performance, financial position and cash flow situation in fiscal 2020:
Gigaset expects a slight to moderate decline in revenue in the Phones segment and a slight increase in revenue for the Smartphones, Smart Home and Professional product segments as a whole in 2020. EBITDA will be at the level of the figure for the previous year after adjustment for the main positive special effects of €7 million. The free cash flow will likewise be around the level of the previous year. Unforeseen, significant changes to general commercial or economic conditions may mean that the guidance needs to be adjusted.
Adjustment of the outlook
The situation in Europe and worldwide has worsened sharply since the Annual Report was audited. Public life has come to a standstill. It not foreseeable at present how long it will take to combat the pandemic or how long its effects will continue to reverberate. Gigaset therefore believes that the outlook given in the Annual Report and reproduced here again has been overtaken by events and so feels obliged to adjust it.
In view of the direct effects of the coronavirus pandemic, as well as Gigaset’s dependence on external factors outside its control – i.e. decisions by governments to impose curfews and close businesses and borders, as well as the duration and further evolution of the pandemic itself –, the company will not issue a guidance for 2020, since a reliable forecast is not possible given the unique nature of the current situation.
The complete 2019 Annual Report can be downloaded here.