Gigaset : also on track in the second quarter of 2017

Press Release
Munich, August 16, 2017

Gigaset AG also on track in the second quarter of 2017

• Consolidated revenue down minus 3.6% to EUR128.3 million due to challenging market environment in the Consumer Products segment
• Gains in market share in core business for Cordless Voice in various European countries
• Growth in the Business Customers, Home Networks and Mobile Devices Business Units
• All in all, positive operational results for the third half year in a row
• Outlook confirmed, revenue expected to beyond the level of the previous year
• Cost situation relieved by personnel dismantling, additional costs for ongoing mobile devices ramp-up - overall on budget

Gigaset AG (ISIN: DE0005156004), an internationally operating company in the area of communications technology, today published its business figures for the first half of 2017. The figures clearly show that the company's realignment is starting to bear fruit. Although the company suffered a slight drop in revenue of 3.6% to EUR128.3 million due to the difficult market environment in the Consumer Electronics segment, all the other Business Units achieved a significant increase in revenue.

"Thanks to the rigorous implementation of our operational strategy we are back on track," as Klaus Weßing, CEO of Gigaset AG, explains: "We have stabilized core business in the key European countries by improving margins and through targeted sales activities, successfully cut current costs through initial restructuring steps, and thus created new freedom to invest on a considerable scale." Once the restructuring of the company has been completed at the end of this year, Gigaset will cut costs by a double-digit million euro amount per year, which, among other things, will go toward tapping new growth segments.

The result from core business before depreciation and amortization (EBITDA) was EUR5.7 million (previous year: EUR10.3 million). A positive effect came from a significant reduction in personnel costs of EUR7.5 million to EUR34.6 million. For the successful ramp-up of the new Mobile Devices business, excess figure was necessary.

This is reflected in the material cost ratio as well as in the material costs. In addition, the Executive Board of Gigaset AG made the decision to release significantly higher sums for marketing and representation expenses of EUR 3.5 million as well as for research and development in the amount of EUR 1.1 million. This is reflected in an increase in other expenses from the core business. Adjusted for these expenses, EBITDA compared to the prior-year period is unchanged.

Revenue by Business Unit
In the Consumer Products segment Gigaset generated revenue of EUR98.1 million (previous year: EUR110.7 million) in the first six months of 2017. The decline is due to what continues to be a difficult environment in the market for cordless phones. However, Gigaset was able once again to maintain its premium position over the competition and achieve an increase in revenue in key markets. In the EU 4 (Germany, Netherlands, France and Italy), the market share in terms of units sold rose by 2.1%; looking at the German market on its own, this market share even rose by 3.9%. In the Netherlands, the market share rose by 5.7% in units and by 5.0% based on revenue. "In summary, it can be stated that Gigaset performs better than the market," continues Klaus Weßing. "The overall market is reduced while we are gaining market share."

Revenue in the Business Customers segment increased significantly by 25.7% to EUR25.4 million (previous year: EUR20.2 million). The main drivers here were also the extremely positive development in the German market. In perspective, Business Customers is developing into an ever-growing sales pillar in the company's product-offer mix.

Considerable increases in the growth areas of Home Networks and Mobile Devices were additionally able to offset revenue. Revenue in the Home Networks segment rose by 10.0% to EUR1.1 million (previous year: EUR1.0 million). In particular, Gigaset sees growing demand in the field of building security in the future and has responded to that by clearing positioning its Home Networks products with a focus on that.

In the Mobile Devices segment, revenue grew by as much as 236.4% to EUR3.7 million (previous year: EUR1.1 million). With the GS160 entry-level model launched at the end of 2016 and its successor, the GS170, that came onto the market in June 2017, Gigaset has launched the first smartphone developed by the company itself.

"The new smartphones are an excellent strategic addition to our product portfolio, since market researchers see great potential in the mid-range and low price segment for brand products that are attractive value for money," Klaus Weßing closes.

Outlook: Revenue expected at the level of the previous year
The company will continue its strategic realignment uncompromisingly. That means: winning market share in Consumer business to minimize the decline in revenue in core business, growing revenue in the Business Customers segment, improving its market position in the Home Networks segment, and further expanding its own smartphone business in the Mobile Devices segment. Gigaset will also continue to focus strongly in the second half 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).