Gigaset AG publishes financial result for the third quarter of 2018

30. November 2018 Published by Raphael Doerr

Gigaset AG (ISIN: DE0005156004), an internationally operating company in the area of communications technology, today published its business figures for the third quarter and first nine months of 2018. The company posted consolidated revenue totaling €168.7 million in the first nine months of 2018 (previous year: €188.0 million).

The decline is attributable to the fact that the market environment in the Phones segments (formerly Consumer Products) remains fiercely competitive, and to the exceptionally long and hot summer, which induced a shift in interests and spending by private households. However, the segments Professional (formerly Business Customers) and Smart Home (formerly Home Networks) posted sharp rates of increase. Business in the Smartphones segment (formerly Mobile Devices) was slightly down on the previous year, likewise due to restrained interest in consumer electronics as a result of the summer’s weather.

“Our business has always been strongly seasonal in character. The extremely hot and long summer resulted in slight drops in the Phones and Smartphones segments. We nevertheless expect strong Christmas trade,” said Klaus Weßing, CEO of Gigaset AG. “However, what’s much more important is that Gigaset AG’s transformation and expansion of the future segments are going according to plan. The Professional and Smart Home segments are growing sharply. We are on the right track. As part of the digital transformation we will develop new business models and expand Gigaset into an integrated hardware, software and service provider. We will be able to boost our efficiency and leverage synergies through modularization of the product platform.”

Another increase in gross profit margin

Gross profit in the first nine months of 2018 was €87.0 million (previous year: €93.4 million), but the gross profit margin increased to 51.6% from 49.7%. EBITDA in the first nine months of 2018 was €4.5 million and hence down on the same period of the previous year (€12.0 million). The restructuring meant that personnel costs were reduced sharply by 10.1%; however, marketing and representation costs, especially for new products, increased.

Revenue by business segment

Revenue for the Phones segment in the first nine months of 2018 was €118.2 million (previous year: €140.8 million). This decline was in line with general market trends in the EU 4. Gigaset again succeeded in growing its market share in the Phones segment to 43.6% in terms of revenue and thus in maintaining its market leadership in the EU4.

The Professional segment, in which Gigaset offers innovative communications solutions for enterprises, once more grew sharply by 8.8% in the first nine months, increasing its revenue to €39.5 million (previous year: €36.3 million). Growth was driven mainly in Germany, Spain and Italy by DECT base stations and IP-based products. With the launch of its new N870 multi-cell system, Gigaset has successfully concluded its largest research and development project of the past years and, for the first time, has marketed an enterprise solution that can be scaled to up to 20,000 users. The company sees further revenue potential in the enterprise market.

Revenue in the Smartphones segment in the first nine months of 2018 was €9.2 million, hence slightly down on the previous year (€9.5 million), mainly due to the exceptionally long and hot summer in 2018. Gigaset was able to expand its smartphone portfolio significantly with the GS100, GS180 and GS185 models in May 2018 and expects that to deliver further positive boosts to growth in this segment. Furthermore, the Gigaset GS185 is the first smartphone to be produced in Germany. This unique selling point aroused a lot of attention in retail and among customers. Consequently, new revenue potential is to be leveraged with further products. A strong fourth quarter of 2018 is also anticipated with the current portfolio.

Smart Home posted a sharp 27.7% increase in revenue to €1.8 million (previous year: €1.4 million). Gigaset still believes the market for smart home systems and services has a highly promising future. Specifically in the care-related sector, it anticipates significant potential and, in the fourth quarter of 2018, was one of the first technology companies to start advertising special smart care products (senior citizens assistance systems). This new product demonstrates the potential of the platform strategy and the opportunities arising from digitalization. In view of the huge need for such solutions in Western industrialized societies, the company expects positive growth in this segment moving ahead. As a result of the write-down for Gigaset Mobile Pte. Ltd., equity fell to €9.4 million from €24.1 million at December 31, 2017.

Outlook for 2018

Gigaset will continue to focus on the realignment of the company in 2018. This means gaining market share in Phones business, expanding revenue in the Professional segment, further expanding Smartphone and Smart Home business as well as establishing new business segments such as Smart Care and Smart Communications. The Group therefore expects the following for the current fiscal year:

  1. Annual consolidated revenue between €277 million and €300 million due to volatile end-of-year sales.
  2. A negative free cash flow between minus €35 million and minus 7 million before cash proceeds from financing due to considerable investments and subsequent expenditure for the social compensation plan and provisions for risks from past tax audits for previous years.
  3. EBITDA between €20 million and €28 million impacted by a further decline in gross profit in the Phone segment, an increase in gross profit in the Smart Home and Professional segments, and an increase in expenditure on development and marketing.

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