Gigaset AG wins market share in a tough climate and implements new strategy consequently

- Consolidated sales from continuing operations is above EUR 90.4 million
- EBITDA is EUR –11 million due to non-recurring provisions for restructuring and special effects
- Market share in core business in Europe grown by three percent in terms of units and two percent in terms of revenue
- Siemens waives the final purchase price installment of EUR 9.9 million due to fulfillment of contractually stipulated requirements over two years  
- Initial phase of concrete restructuring completed and company presses ahead with developing new growth segments
- CEO Charles Fränkl: “Despite the continuing economic uncertainty, we are systematically adding market share in Europe. We are adjusting our corporate and cost structures. As a result, we have created further foundations for profitable growth and are swiftly driving our ‘Gigaset 2015’ strategy.”

Gigaset AG, an internationally operating company in the field of communications technology and Europe’s market leader in DECT phones, has increased its market share in Europe in the traditionally weaker third quarter despite a continuing tough climate and created further foundations for profitable growth.

Consolidated revenue for continuing operations in the third quarter was EUR 90.4 million (Q3/2011: EUR 105.7 million). EBITDA from continuing operations was around EUR –11.0 million (Q3/2011: EUR 14.7 million). The decline in the operating result is mainly attributable to non-recurring expenses of EUR 19.2 million as part of the restructuring the company initiated.

“The continuing uncertainty as a result of the financial, economic and sovereign debt crisis and resultant gloomier consumer sentiment, as well as exchange rate movements, had an impact in the third quarter. In addition, the company has invested approximately EUR 3.0 million in establishing new growth segments,” said Gigaset’s CFO Dr. Alexander Blum. Waiving of the final purchase price installment of EUR 9.9 million by Siemens AG had a positive effect on EBITDA. This had become possible in September 2012 after Gigaset AG had fulfilled requirements stipulated by Siemens AG for over two years. The objective of these requirements was to enable Gigaset to transition to independence successfully after being sold by Siemens AG.

The EBITDA therefore contains the non-recurrent provision for the necessary restructuring as well as investments for the development of the new business segments. Without these positions, the group could have reported a positive EBITDA also following the reduction of the waiver of the price installment by Siemens AG. Due to the stated special effects, Gigaset AG generated a consolidated net loss from continuing operations of around EUR 15.0 million in the third quarter (Q3/2011: consolidated net income of EUR 7.5 million) and diluted earnings per share of EUR –0.30 (Q3/2011: EUR 0.15). The free cash flow from continuing operations in the third quarter was EUR –8.1 million as a result of season effects (Q3/2011: EUR 2.5 million). The company’s cash and cash equivalents at September 30, 2012, were EUR 32.3 million (December 31, 2011: EUR 62.3 million), while financial liabilities totaled EUR 12.8 million (December 31, 2011: EUR 6.1 million).

Increase in market share

The third quarter of 2012 reflected a continuing drop in consumer sentiment due to the current economic circumstances in many European countries. The overall market for cordless phones in Europe declined in July and August by almost 11 percent in terms of revenue in the markets observed by Gigaset. With the exception of the Polish market, sales in the other eleven countries were all down year on year in July and August. In this tough climate, Gigaset AG was able to grow its market share in its core business by three percent in terms of units and by two percent in terms of revenue in Europe.1

 

First phase of restructuring completed

At the beginning of October, Gigaset AG agreed on socially responsible workforce reductions with the employee representatives faster than scheduled and so completed the first phase of its restructuring. The entire cost and efficiency program also comprises reductions in the costs of non-cash benefits and services. The company expects annual savings amounting to EUR 30 million. The full impact is expected from 2014 onwards.

In addition, the company is working to establish a new Product and Innovation Center in Düsseldorf, which is intended to produce significant increases in efficiency by optimizing the geographical setup of the three Business Units Consumer Products, Business Customers and Home Networks.

“Despite the continuing economic uncertainty, we are systematically adding market share in Europe. We are adjusting our corporate and cost structures. As a result, we have created further foundations for profitable growth and are swiftly driving our ‘Gigaset 2015’ strategy,” said Gigaset’s CEO Charles Fränkl. The objective of the “Gigaset 2015” strategy is to lead the company back to the path of growth.

Business Units achieve initial successes in implementing the new strategy

A core component of the strategy is greater use of the Android operating system. Gigaset presented two Android-based prototypes at the Consumer Electronics Fair (IFA) in Berlin at the beginning of September: The SL 930 cordless phone and the tablet-like business phone Maxwell, which boasts an innovative videoconference feature and a generous 10.1” multi-touch display. Both products are to be launched in the course of 2013. In addition, Gigaset successfully introduced the S820 hybrid fixed-line phone, which combines a touch display and traditional keypad in one device.

As the European market leader in cordless telephony, Gigaset Communications GmbH from Bocholt was presented with the award in the category “Best in-house tool making with less than 50 employees” in this year’s “Excellence in Production” contest. This accolade underscores the high quality of Gigaset’s products.

Moreover, the new Product and Innovation Center in Düsseldorf is being established.

Consumer Products

In its core business of cordless phones, Gigaset was able to grow its market share slightly overall in Europe over the previous year, both in terms of units sold and revenue. In particular, it is recording positive trends in the key markets of Austria, the UK, Germany, Spain, Russia and Poland.2

Launch of the products S810 and A510, which use the WDCT standard, in China will further strengthen Gigaset’s market position in the premium segment there.

The company has successfully concluded agreements with new strategic sales partners in several countries. For example, two major telecommunications providers were won as customers in the South America region and a leading partner in the market was acquired in Eastern Europe. Gigaset was included in the range offered by two large retail chains in Spain and so has successfully accomplished restructuring of the local company it began last year.

The company has introduced a new sales concept in the specialty retail segment in its core market of Germany. The new concept authorizes specialty retailers as part of a two-level distribution concept in order to enable marketing of value-added services to boost the Gigaset brand in response to changes in consumers’ purchase behavior. In future, the company will directly supply Internet channels just like large retail chains. Gigaset has launched a TV advertising campaign to further strengthen Christmas business in the important private customer market.

Business Customers

The sales team at the Business Customers Business Unit has been strengthened further in key European markets: Germany, the Netherlands, the UK, Denmark, Sweden and Norway. The number of sales partners has been increased significantly as part of an aggressive campaign to acquire and qualify sales partners.

Finally, launch of a new software release for desktop phones enables improved integration of system phone functions together with the T300 / T500 PBX systems.

Home Networks

To prepare for market launch of Gigaset elements, a prototype of which was showcased at IFA, the company is holding intensive discussions with potential partners and new sales channels. In addition, further studies were conducted with focus groups with the aim of identifying other application cases for the smart home solution that was announced for mid-2013.

Outlook

Gigaset AG expects a slightly negative EBITDA in the current fiscal year. After adjustment for this one-off effect of restructuring costs, the company anticipates a positive EBITDA, although it has already announced that this will be well below that of the previous year.

In addition, Gigaset expects its revenue to decline in the single-digit percentage range and to post a negative free cash flow in the low double-digit million range. The company has set itself the target of achieving revenue of EUR 500 to 560 million and an EBITDA margin of around ten to 13 percent in 2015 thanks to its improved setup and the new business segments.

 

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 currently around 1,700 employees and a market presence in more than 70 countries.

Gigaset AG is listed on the Prime Standard of Deutsche Börse and so is subject to the very 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      Kerstin Diebenbusch, Investor Relations

Phone: +49 (0)89 444456-600                                  Phone: +49 (0)89 444456-937  

E-mail: info.presse(at)gigaset.com                    E-mail: info(at)gigaset.com

 

Overview of the figures:

 

  July 1 – September 30, 2012 July 1 – September 30, 2011
EUR thousand Continuing operations Total Continuing 
operations
Total
Consolidated revenue 90,401 93,124 105,713 109,194
Earnings before interest, taxes, depreciation and amortization (EBITDA) -11,027 -11,911 14,72 13,733
Earnings before interest and taxes (EBIT) -17,282 -18,116 8,428 6,213
Consolidated net income/loss -15,028 -15,988 7,503 5,073
Diluted earnings per share in EUR -0.30 -0.32 0.15 0.10
Free cash flow -8,067 -8,03 2,497 4,084


EUR thousand September 30, 2012 December 31, 2011
Non-current assets 105,768 102,916
Current assets 165,116 208,444
Cash & cash equivalents 32,338 62,262
Equity 60,11 76,233

 

  

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

 

 

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