Annual Report Milestones in 2010
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Annual Report Milestones in 2010 January/February October › Gigaset Communications GmbH achieves turnaround (ear- › Capital increase successfully completed with a volume of lier than expected) EUR 13 million and considerably oversubscribed › Gigaset Communications GmbH with a new management team November › Gigaset AG issues two-year convertible bonds with a volume April of EUR 23.8 million › Gigaset AG sells camping product distributor Fritz Berger to › Earnings position of Gigaset AG stabilizes: positive develop- a strategic investor ment of EBITDA, free cash flow and reduction of debt › Gigaset AG signs letter of intent regarding Gigaset with Sie- July mens AG › Gigaset AG sells Golf House to a strategic consortium December August › Convertible bond is successfully placed › Annual shareholders’ meeting of Gigaset AG elects three › Gigaset AG sells Anvis new members to the Supervisory Board › Agreement is reached with Siemens AG regarding Gigaset › Dr. Peter Löw is elected Chairman of the Supervisory Board Communications GmbH › Hans Gisbert Ulmke leaves his position as Chairman of the › Gigaset AG acquires outstanding 19.8 % of the Gigaset Group Executive Board to hold 100% of the shares › Gigaset AG sells Carl Froh to management September › Extraordinary shareholders’ meeting gives broad approval › Michael Hütten leaves the Executive Board to changing the business model, renaming the Company › Maik Brockmann is appointed to the Executive Board Gigaset AG and creating new authorized capital › Executive Board and Supervisory Board approve capital in- › Gigaset AG sues the SKW Group crease using authorized capital › Gigaset AG sells shares in Concilium AG Key figures EUR millions 2006 2007 2008 2009 2010 Consolidated revenues 768.2 2,102.3 5,505.0 3,492.0 1,009.5 Earnings before interest, tax, depreciation and amortization (EBITDA) 126.2 202.7 111.5 17.7 3.5 Earnings before interest and tax (EBIT) 100.2 140.5 -115.5 -139.8 -83.3 Consolidated net profit 112.6 114.6 -145.7 -153.0 -100.6 Free cash flow 36.4 -24.8 180.9 -68.9 -41.6 Earnings per share (diluted, EUR) 4.60 4.43 -5.09 -5.51 -3.45 Earnings per share of continuing operations (diluted, EUR) 4.75 2.41 -5.34 -2.35 -0.26 Total assets 665.3 1,834.1 1,719.0 658.0 345.6 Shareholders’ equity 274.8 401.0 266.4 121.5 35.0 Equity ratio (%) 41.3 21.9 15.5 18.5 10.1 Workforce 4,645 12,319 13,455 5,049 2,333 2 table of contents Table of Contents Letter to the Shareholders . .6 Business Model of Gigaset AG . .8 The Gigaset Share . .12 Corporate Governance . .16 Report of the Supervisory Board . 20 Combined Management Report . 26 Consolidated Financial Statements of Gigaset AG . 70 › Consolidated Income Statement . 70 › Consolidated Statement of Financial Position . 70 › Consolidated Statement of Changes in Equity . 72 › Consolidated Cash Flow Statement . 74 › Statement of Comprehensive Income . 76 Notes to the Consolidated Financial Statements . 78 A. General Information and Presentation of the Consolidated Financial Statements . 78 B. Summary of Principal Accounting and Valuation Methods . 84 C. Notes on Financial Instruments . 98 D. Notes on the Income Statement . 109 E. Notes to the Balance Sheet . 118 F. Other Information . 147 Independent Auditor’s Report . 167 List of Shareholdings . 168 Financial Calender . 172 Publisher Information . 172 3 reaching The confidence of the shareholders is target both the motivation and the goal of the company‘s management. You showed this confidence in 2010 with the approval of the change in strategy - our goal was clearly defined: strengthening the company for its future market position, ensuring a streamlined and efficient structure, and developing a long-term, future-oriented product and business strategy. Our common goal is to develop Gigaset AG into a successful and distinguished industry leader within the telecommunications and multimedia industry. Dear shareholders, 2010 was a year of massive change for our Company. The ma- In order to raise the liquidity we required, a capital increase jority of the year was overshadowed by negative headlines, with a volume of EUR 13.0 million was carried out and a con- with the legal disputes involving Siemens AG weighing heav- vertible bond of around EUR 23.8 million issued. The high lev- ily on us in particular. Added to this was the difficult liquidity el of acceptance for these two capital-raising measures, and situation, which made it necessary to sell subsidiaries at short the associated confidence of investors in the new company notice, together with legal disputes with former members management team, was demonstrated by both measures be- of the Executive Board, former employees and partners, and ing clearly oversubscribed. buyers of former corporate subsidiaries. The loss of staff in key departments like Operations and M&A meant that it proved Alongside the enhanced capital base and the lower costs, we impossible to meet the objectives that had been set, such have decreased the complexity of the corporate structures by as sustainably developing our subsidiaries and widening our reducing the number of (intermediate) companies from over investor base. All of these factors were reflected in a share 100 to around 40 today. price that lost over 90% of its value to fall below one euro in the summer of 2010. Value was destroyed, making it hard to Finally, the sales of the Anvis Group, Carl Froh, Concilium AG envisage any kind of future. This resulted in a massive loss of and at year-end Wanfried Druck Kalden subsidiaries led to an reputation. inflow of cash and a further reduction of risk in the corporate group. You, the owners of the Company, responded to this by ex- pressing your confidence in a new Supervisory Board by a Implementing the change of strategy large majority at the annual shareholders’ meeting on August in 2011 26, 2010. At its constitutive meeting, the new Supervisory The necessary change of strategy was approved by you, our Board elected Dr. Löw to act as its Chairman. I was appointed shareholders, at the extraordinary shareholders’ meeting held to the Company’s Executive Board on September 1, 2010. on December 20, 2010. This allows us to concentrate on the telecommunications and accessories segments, where we Change of strategy in 2010 have already enjoyed success with Gigaset, our most valuable Settling outstanding legal disputes was one of the first mea- subsidiary. sures to be undertaken with a view to stabilizing the situa- tion of the Company and returning its focus to the future. ARQUES Industries AG was renamed Gigaset AG in mid-Feb- After two months of intensive negotiations, a settlement ruary 2011 when implementing the change of strategy. This was reached in the dispute with Siemens AG over outstand- took place at almost the same time as the holding company ing purchase price installments arising from the acquisition moved into the Gigaset premises. This relocation is intended of Gigaset Communications GmbH and unfulfilled payment to help us benefit from shorter communication and decision commitments. We have succeeded in settling all disputes and channels moving forward, promote convergence in the vari- paying all financial obligations to third parties. The arbitration ous corporate cultures and physically complete – and hence proceedings have been terminated. On December 14, 2010, underscore – the strategic move into the telecommunica- Gigaset AG acquired the remaining 19.8% of the shares in the tions sector. Gigaset Communications GmbH that it did not already own, taking its holding to 100%. To further implement the new strategy, we sold our holding in Oxxynova by the end of the first quarter of 2011, thus press- The costs incurred by the holding company have been sig- ing ahead with reducing complexity, deconsolidating liabili- nificantly lowered by decreasing the financial burdens from ties and eliminating the existing risk. continuing obligations and consulting fees – including the reduction in the cost of attorneys and external consultants With regard to the commercial activities of Gigaset Communi- mentioned above – as well as by renegotiating contracts and cations GmbH, the immediate objective is to expand its mar- reducing IT spending. ket leadership and boost both revenues and profitability. That 6 Letter to the Shareholders this is possible is demonstrated by the net income for the year of the Gigaset Group, which is well above the planned annual total that we had published. This growth will be accelerated by rolling out new products, expanding into promising mar- kets and completing complementary acquisitions that are in the pipeline. The outlined measures that we have initiated as part of the change of strategy have succeeded in restoring the confidence of investors – your confidence – and confidence of the capital market. This is reflected in our inclusion in the TecDAX index and a share price that totaled EUR 3. 88 on March 31, 2010. We would like to thank our employees for their hard work and you, our shareholders, for the confidence you have placed in us. We trust that we can continue to count on your support. Best regards, Maik Brockmann Member of the Executive Board 7 Business Model of Gigaset AG The new business model The change of strategy At the extraordinary shareholders’ meeting on December 20, The reasons for the change of strategy, and hence for discon- 2010, the shareholders of ARQUES Industries AG voted by a tinuing the previous business model of ARQUES Industries large majority to change the business model and rename the AG as an equity investment company concentrating on the company Gigaset AG. The new business model calls for the acquisition, turnaround and restructuring of companies in Company to focus on the telecommunications industry and situations of transition, are many and varied.