Sharp improvement in earnings: Gigaset AG remains on track in a challenging environment27. September 2022 Published by Raphael Doerr
Bocholt, September 27, 2022 – Gigaset AG (ISIN: DE0005156004), an internationally operating company in the area of communications technology, today published its report for the second quarter and the first half of 2022. Despite the overall economically challenging situation caused by the ongoing Corona pandemic and the resulting shortage of materials, the fighting in Ukraine, as well as interest rate increases, inflation and recession fears, the company recorded a slight increase in sales in the second quarter (+1.3%). EBITDA for the period April to June 2022 doubled to €5.3 million. Revenues in the first half of the year also rose slightly by 1,4 % and were thus in line with the expectations the company had communicated. EBITDA increased far more sharply by 37.2%.
Revenues in the second quarter of 2022 were €52.2 million, compared with €51.5 million in Q2 2021. Earnings before interest, taxes, depreciation and amortization (EBITDA) doubled year over year to €5.3 million (Q2 2021: €2.7 million). Revenues in the first half of 2022 rose slightly to €103.4 million following €102.0 million in the same period of the previous year. EBITDA in the first half of 2022 was €5.8 million, well up on the previous year (H1 2021: €4.2 million), despite the fact that material costs increased further as a result of higher material and commodity prices. However, personnel expenses were reduced slightly.
“Despite the ongoing adverse conditions, Gigaset has displayed a high degree of resilience. We identified changes in the economic environment at an early stage and took appropriate countermeasures. Flexibility and powerful performance are our tools for ensuring Gigaset AG’s success even in rough seas. We will continue to rely on these strengths in the future, as we see increasing economic headwinds emerging on top of the ongoing supply bottlenecks,” said Klaus Weßing, CEO of Gigaset AG, on Tuesday in Bocholt.
Digitization as a growth opportunity
The digitalization of business and society as a whole is proceeding at an ever faster pace. Modern worlds of work with home offices and remote work require large-scale adaptation of IT and telecommunications structures. That affects private and business customers alike. Gigaset aims to accompany these trends and believes it is excellently positioned to benefit from them.
After the brief boom in the market for DECT cordless phones caused by the coronavirus pandemic, things have now returned to normal. In Gigaset’s assessment, the global market will decline again in the future and price levels will continue to fall. The main reason for that is the ever-increasing volume of alternative communications technologies.
The smartphone market was still growing rapidly at the beginning of the 2010s. However, that pace has slowed down in recent years. Gigaset bucked the trend and was able to sell significantly more smartphones in the B2B segment. According to Gigaset, that is due to business customers opting for end-to-end solutions for their employees in the context of remote working. That is exactly what Gigaset offers as the only provider of fixed-network devices and smartphones for B2C and B2B from a single source.
Sales in the Smart Home segment lag behind expectations. The company is nevertheless sticking to its goal of gaining further market share with the four application areas of security, energy, comfort and assistance for people in need of care, and above all of injecting new momentum into the smart home business through new collaborations and partnerships, such as with Home Connect Plus and BeHome.
In the field of business telephony, Gigaset sees further potential for IP and cloud solutions, which are increasingly ousting traditional transmission technology, especially in Europe. Since the change in transmission technology does not affect the communications hardware, Gigaset will benefit from this as a manufacturer in the B2B arena with close ties to cloud partners. In addition, Gigaset successfully delivered the first desk phones developed for Unify in the first half of 2022. In December 2020, the company had concluded an exclusive agreement for the development of a new family of end devices. The delivery of the first devices is therefore right on schedule.
Performance by segments
Revenues in the Phones, Smartphones and Smart Home segments, which focus predominantly on private customers, declined by 7.3% to €73.5 million compared with the prior-year period (H1 2021: €79.2 million). In contrast, revenues in the Professional segment with business customers rose sharply by 31.7% to €29.9 million (H1 2021: €22.7 million).
The market for fixed-line telephony remains challenging. The expected further decline is also reflected in sales, which were again negatively impacted in 2022 by the special effect of insufficient components: At the Phones segment, they fell in the first half of 2022 by 10.0% to €63.3 million, compared to €70.3 million in same period of the previous year.
The Smartphones segment is in very good shape. It continued to recover from the effects of the coronavirus crisis and grew its revenues to €9.6 million – a significant increase of 17.1% compared to the same period of the previous year (H1 2021: €8.2 million).
The Smart Home segment remains challenging. Revenues in the first half fell by 25.0% to €0.6 million – following €0.8 million in the same period of the previous year. From Gigaset’s perspective, this development is not satisfactory. The company is endeavoring to counteract the current persistent fears of recession, which are depressing consumer sentiment and turning products such as smart home solutions into optional luxury purchases in times of rising costs for ancillary expenses such as electricity and gas, and to address new sales channels through partnerships in the B2B segment.
In contrast, revenues in the Professional segment with business customers were very pleasing in the first half of 2022, climbing to €29.9 million. That is a strong year-on-year increase of 31.7 % (H1 2021: €22.7 million).
“Given the overall situation, we’re pretty satisfied with the half-year figures,” says Thomas Schuchardt, CFO of Gigaset AG. “Above all, the significant improvement in earnings shows we’ve steered Gigaset well through the unprecedented crises of the recent past on the back of our business strategy and appropriate measures. After two years of the coronavirus crisis, the supply chain problems that continue to this day were also a challenge for Gigaset, and the war in Ukraine is leaving further deep scars on the macroeconomic environment. We’re all the more pleased that two of our four segments, Smartphones and Professional, nevertheless performed highly positively in the first half of 2022 compared with the same period of the previous year.”
Explanations on the outlook for 2022
There is still great uncertainty about how the current fiscal year 2022 in general will pan out and how the economy in particular will perform. That will mainly depend on what unexpected economic upheavals still occur as a result of the war in Ukraine war or a renewed exacerbation in the coronavirus situation. Accordingly, there is also uncertainty about Gigaset’s further business performance this year.
Consequently, Gigaset also continues to see itself significantly dependent on external factors beyond its control – in other words, decisions by governments on economic sanctions or new measures to combat coronavirus.
The greatest uncertainty continues to be in the area of material availability. It may not be possible to constantly ensure full utilization of production capacities as a result of existing shortages (such as for chipsets) on the procurement market.
There is still no clear picture of what will happen moving ahead as regards the supply of semiconductors. However, Gigaset’s long-standing, established business relationships with partners will help it ensure a sufficient supply of materials.
General statement by the Executive Board for 2022
Given the assumptions stated in the forecast and assuming that there is no sudden and significant deterioration in the situation as regards the pandemic, the supply chain situation or the war, Gigaset still anticipates the following financial performance, financial position and cash flow situation in fiscal 2022:
- A slight increase in revenues and EBITDA
- A moderately positive free cash flow
The complete report on the second quarter and first half of 2022 can be downloaded here.