Letter from the
Executive Board

Market conditions in 2025 – challenges that set the pace

2025 was still characterised by a persistently subdued industrial economy in Germany and Europe. Geopolitical uncertainty, high energy prices and a largely restrictive interest rate environment acted as a brake on investment decisions – particularly among customers in cyclical sectors. In many markets, demand was not fundamentally lower, but planning was more cautious: projects were postponed, budgets reprioritised, and inventories managed more tightly. At the same time, cost inflation and wage rises increased the pressure on margins – particularly where value-added depth and labour intensity are high.

Our subsidiaries responded with great adaptability: through consistent work on pricing and terms, with a focus on delivery capability and quality, but above all through structural improvements to their own processes. This point is crucial: 2025 was rather disappointing in terms of financial figures, but not in terms of the operational improvements achieved. It was a year in which we scrutinised many processes and made significant improvements within the framework of the GESCO Business System, thereby preparing ourselves for the next phase of growth.

GESCO Business System – First successes are becoming apparent

2025 was a year in which the GESCO Business System (GBS) continued to prove its worth as a framework for transformation. We see the GBS as an umbrella for methods, principles and best practices – particularly those based on lean management – and this is precisely where its strength lies: it transforms experiential knowledge into a repeatable and easily implementable system.

The key change we are seeing across many units in 2025 is a stronger link between strategy and operational implementation. The GBS helps not only to formulate goals but also to translate them into measurable initiatives: productivity, scrap, set-up times, material flows, stock levels, and on-time delivery. This is hard work, and progress varies from place to place. But the direction is clear: where Lean is consistently implemented, the ability to remain profitable in volatile markets increases – and to scale disproportionately as demand picks up again.

Another effect is cultural: Lean strengthens accountability where it belongs – close to the process. Teams are empowered to identify problems, solve them systematically and embed improvements. Especially in times of high costs and fluctuating demand, this empowerment is a decisive competitive advantage.

Business Development 2025

The development of the Group’s key figures in the 2025 financial year must be assessed on a case-by-case basis. On the sales side, demand remained subdued; at the same time, the quality of earnings improved in some areas, not least as a result of consistent efficiency measures.

Group sales amounted to €495.0 million, down from €513.8 million in the previous year, representing a decline of 3.7%. Despite the fall in sales, EBIT rose from €15.2 million to €15.5 million; accordingly, the EBIT margin (ROS - Return on Sales) improved slightly to 3.1% from 3.0%. Group earnings after minority interests more than doubled to €9.9 million, compared with €4.4 million in the previous year; earnings per share thus rose to €0.96, compared with €0.42 in 2024.

GESCO’s financial position is also extremely sound: as at 31 December 2025, equity stood at €272.6 million; the equity ratio was 60.9%.

These figures highlight two key points: Firstly, the Group has maintained its stability in a challenging market environment. Secondly, we have managed to improve profitability despite significant (one-off) costs and weak demand.

Milestone 2025 – Acquisition of Eckart GmbH

A particular milestone of the 2025 financial year was the acquisition of Eckart GmbH, which was announced on 1 July 2025 and took effect retroactively from 1 January 2025. Eckart, based in Schlüchtern, Hesse, specialises in the development, production and sale of hydraulic swing motors and rotary actuators, valve actuators and lift-and-swing units. The products are used in a wide range of applications in mobile machinery, such as in mining, construction machinery and intralogistics, as well as in stationary mechanical engineering applications.

Strategically, the acquisition strengthens the Industrial Assets & Infrastructure segment and fits very well with our criteria for M&A targets, particularly with regard to value creation that drives differentiation, innovative capacity and a product portfolio relevant to customer success. Eckart also has distribution centres in key markets such as the USA, China, France and Italy, and is thus well positioned internationally. The acquisition is not only a targeted addition to the portfolio, but also a logical step in GESCO SE’s growth strategy, which encompasses both organic and inorganic growth.

Looking ahead

We see grounds for cautious optimism for 2026. In Germany, there are increasing signs that the economic environment could stabilise, buoyed by the prospect of falling interest rates, easing inflationary pressures and a gradual revival of industrial demand. No one should expect the situation to improve abruptly or linearly; at the same time, the direction is crucial, as a phase of waiting and seeing can once again give way to a phase of decision-making and investment.

GESCO is entering a potential recovery with a starting position that we have specifically built up: the operational improvements initiated and implemented in the subsidiaries in 2025 are not a short-term campaign, but a structural lever for productivity, quality and delivery capability. As capacity utilisation rises again, these improvements should have a disproportionately large impact – on margins and cash flow – and thus further enhance the quality of earnings. Our current GBS focus on sales and growth initiatives will also promote and support this development as early as the current financial year.

At the same time, our solid balance sheet gives us the necessary freedom to act, ena-bling us not only to invest organically but also to capitalise on opportunities for inorganic growth. As a long-term partner for medium-sized industrial companies, we continue to see attractive opportunities, not least due to numerous succession situations.

Against this backdrop, it may be particularly interesting to support GESCO as a share-holder right now. In the current phase, characterised by uncertainty, companies that are continuously improving and at the same time have the financial flexibility to invest counter-cyclically are attractive. GESCO combines both – systematic operational trans-formation within the companies and the ability to create value through targeted acquisitions.

For existing shareholders, the fact that substantial value has been built up in recent years may be little consolation given the unsatisfactory share price performance. How-ever, this forms the basis for our confidence that we will be able to achieve significantly better results in the future and thus also bring about a turnaround in the share price.

Acknowledgements

Finally, we would like to express our sincere thanks to you – our shareholders – for your trust, patience and support. You enable us to act with a long-term perspective: to invest, to transform and to seize opportunities counter-cyclically. Our thanks also go to our employees in all subsidiaries, who have mastered the challenges of 2025 with great dedication and a high level of professionalism.

We are working to further build on the strengths of our industrial holding company – responsibly, performance-oriented and with the clear aim of creating sustainable value for you.

Warm regards from Wuppertal