Gigaset AG: Optimization of the product portfolio reaps further rewards in the third quarter of 2017

Press Release
Munich, November 17, 2017

Optimization of the product portfolio reaps further rewards in the third quarter of 2017

• Consolidated revenue down by 2.1% to EUR188.0 million in a recovering, yet still challenging market environment in the Consumer Products segment.
• Further gains in market share in core business of cordless phones and growth at all other Business Units: Business Customers, Home Networks and Mobile Devices
• Outlook confirmed, revenue expected to be above the level of the previous year

"The figures we presented today show that optimization of the product portfolio in line with our new operational strategy is continuing to reap rewards," states Klaus Weßing, CEO of Gigaset AG. "Revenue at the Business Customers Business Unit increased by around 20% and even more than tripled at Mobile Devices. We are tackling the challenging business climate at Consumer Products by rigorously developing new products, in particular in the growth segments of IP single handsets, as well as new offerings in the field of special phones for the elderly. The latest market trends in our core business also give us cause for optimism moving ahead. The market has recently picked up significantly compared with previous years."

The company posted a result from core business before depreciation and amortization (EBITDA) totaling EUR9.5 million in the first nine months of 2017 (previous year: EUR12.3 million). The sharp fall in personnel costs by around 17% to EUR49.7 million (previous year: EUR59.8 million) had a positive impact on Gigaset's earnings, whereas they were reduced as planned in particular by higher marketing costs, among other things for the launch of the new products from Mobile Devices.
 

Revenue by Business Unit
In the Consumer Products segment Gigaset generated revenue of EUR140.8 million (previous year: EUR157.7 million) in the first nine months of 2017. The decline is due to the still difficult environment in the market for cordless phones and was in line with the general market trend in Europe. However, Gigaset was able once again to maintain its premium position over the competition and achieve an increase in revenue in numerous markets. In the EU 4 (Germany, Netherlands, France and Italy), its market share in terms of units sold rose by 2.7%; looking at the German market on its own, this market share rose by 4.2%.

In the Netherlands, the market share even rose by 4.5% in units and by 4.3% based on revenue. "Gigaset's market share is now 37.6% in units and 41.6% in terms of revenue," adds Klaus Weßing. "Gigaset has thus once again underscored its premium position in the EU 4."

Revenue in the Business Customers segment increased significantly by 19.8% to EUR36.3 million in the first nine months (previous year: EUR30.3 million). The increase in revenue in Germany played a major part in that. The IP desktop phones from the new Maxwell series and various DECT cordless phones for professional use sold especially well there.

The growth segment Home Networks also recorded a sharp increase: by 16.7% to EUR1.4 million (previous year: EUR1.2 million). That is attributable to the initial impact of the newly launched marketing strategy and optimized product positioning. Gigaset continues to work intensively on additional applications, such as Google Assistant and Google Home, which are to be integrated in the alarm system, so as to win new customers. Philips Hue, the well-known smart lighting concept, has already been integrated successfully in the Gigaset solution's security case. All in all, Gigaset aims to open up more strongly to relevant third parties and so deliver a perfect customer experience.

In the Mobile Devices segment, revenue more than tripled by 227.6% to EUR9.5 million (previous year: EUR2.9 million). According to a forecast by Statista, the market for smartphones will continue to grow. Following the entry-level model GS160 that was put on the market at the end of 2016, Gigaset successfully launched three other smartphone models - the GS170, GS270 and GS270plus - up to the third quarter of 2017.

"After building a new product portfolio and optimizing our sales strategy, we can now see initial positive trends compared to the previous year," says Klaus Weßing. "Our focus at present is on positioning the product portfolio and gaining a foothold in the markets of various European countries. We are also relying on the continuation of the positive trend in the coming quarters."
 

Outlook confirmed: Revenue expected above the level of the previous year
The company intends to press ahead unswervingly with its realignment in accordance with the new operational strategy. That means:

• Winning market share in consumer business in order to minimize the decline in revenue from core business
• Growing revenue in the Business Customers segment
• Improving the market position of Home Networks and
• Further establishment of the company's own smartphone business in the Mobile Devices segment.

Gigaset will also continue to focus strongly in the fourth quarter of 2017 on establishing new products and business segments, and will increase its expenditure here, mainly on marketing and investments. For the 2017 fiscal year as a whole, Gigaset therefore expects:

• An increase in revenue over 2016 by a low double-digit million amount thanks to the restructured smartphone business.
• The company expects a result from core business before depreciation and amortization of between EUR15 million and EUR25 million. Operational performance will be impacted by a further decline in gross profit in the Consumer Products segment, an increase in gross profit in the Business Customers and Home Networks segments, and an increase in expenditure on development and marketing.
• Due to the considerable investments in the new business segments, as well as 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.

Overview of the key figures

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 is likewise the leader worldwide with around 1,000 employees and sales activities in around 70 countries. Under the name pro, the company continues to develop and market innovative business telephony solutions for small and medium-sized enterprises. In the smart home arena, cloud-based security solutions are developed and marketed under the name elements. The company also operates in the field of mobile devices, with a focus on smartphones.

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