Half Year Results 2019/20

1 April 2019 to 30 September 2019

AgendaOpening Remarks

Frank Rehfeld

Business PerformanceFrank Rehfeld

Financial Results

Andrea Borla

OutlookFrank Rehfeld

05.11.20192Frank Rehfeld, CEO, Opening Remarks
Top-line growth•

Overall sales performance held up well, considering the deterioration in
the global economy over the past few months•

Industry business continues to be impacted by a lack of investment andconfidence amongst customers•The speed of transition in the automotive business to green cars issubject to changes in both government policies and the strategies ofcustomers

Long-term outlook remains confident•

Fundaments remain strong, driven by the mega trends of energy
efficiency, mobility and automation•

Investments in R&D are delivering new products for which customer
feedback is very promising
05.11.20193

Global Manufacturing and Services PMI(Index, greater than 50 = expansion)(IMF, World Economic Outlook, October 2019)05.11.20194

By 2037 global energy related CO2budget
exceeded to keep warming < 2°C

Source:05.11.20195

Renewables/electrification/energy
efficiency can provide 90% of reduction
in energy-related CO2 emissions

Source:05.11.2019

6Appointment of SVP Industry 01.12.19
Rebecca Cullinan• Member of the Executive Management team, reporting directly to CEO• Resp. for product management, sales & marketing, R&D, quality and operations• MBA University of Westminster UK, BSc in Mechanical Engineering from
Jiangsu University China• Fluent in Chinese, English and French
Year

Company/Position

Location2018 - present

Automotive Lighting/Magnetti Marelli
Managing Director, South Europe, Middle East & Africa

Italy

2002 - 2018

Valeo
Managing Director, South East Asia

Thailand,France, UK1998 - 2002

IHS Global InsightSenior Consultant

UK

1994 - 1996

ZüblinContract Manager

China1991 - 1994

China First Tractor Group
Quality Engineer, Quality Control

China05.11.2019

7

AgendaOpening Remarks

Frank Rehfeld

Business PerformanceFrank Rehfeld

Financial Results

Andrea Borla

OutlookFrank Rehfeld

05.11.20198

A leading company inelectrical measurement
Core applications

MotorDrives

Businesses

AutomotiveGreencars

2019/20 Sales

Power Storage,
Generation, Conversion

Conventional
cars

EnergyMeasurement

Industry
Drives &Welding

Renewableenergies

35.1

123.9

-6.1%

-5.8%

Traction

HighPrecision(CHF m)HY vs. HY05.11.20199

Global Sales Spread Steady
Across Regions
GrowthSales
CHF m

23%
34%

12%

30%

HY 2019/20 Q2 2019/20
vs 2018/19 vs 2018/19

China

54.7

-4.8%

-5.1%

Europe

48.2

-9.2%

-9.6%

North America

19.4-15.6%-16.6%

RoW

36.7

+3.7%

+7.0%

Total

159.1

-5.9%

-5.6%

•Close to customers on the ground in all key markets•

Balanced geopolitical and economic exposure

05.11.201910

Industry segment

05.11.201911

Industry Segment
Sales Performance
CHF mBusinesses
Drives2019/20

2018/19

ChangeComments

51.2

61.1

-16.1%••Global reluctance to invest in production
such as welding and robotics
China & Japan sluggish demand

Renewable Energy

40.7

39.1+4.0%••

Strongest in China, India & Japan
Europe solid performance

Traction

26.5

25.4+4.2%••

Investments helped by gov. policies
Growth in China, India & Asia

High precision

5.6

6.0-6.5%••

Market fundamentals remain goodAdoption of new products subject toinvestment confidence

Total Industry

123.9

131.6

-5.8%

05.11.201912

Industry Segment
Regional Markets
GrowthCHF m

HY 2019/20
vs 2018/19

Q2 2019/20
vs 2018/19

China

40.0+1.7%+15.0%

Europe45.6-10.5%-10.4%

North America

13.6

-6.2%

-10.3%

RoW

24.7-7.7%

-4.3%

Total

123.9

-5.8%

-2.5%

Sales
20%
32%

11%

37%

•

H1 sales at CHF 123.9m, down 5.8% (at constant exchange rates, down 3.6%)•H1 last year was comparatively strong but since then global economic
uncertainty means that customers are reluctant to invest, and this is particularly
felt in our drives business05.11.201913

Industry next generation products
Smart Grid

AI-PMUL

RenewablesLZSR

ARU

05.11.201914

Automotive segment

05.11.201915

Automotive Segment
Sales Performance
CHF mBusinesses
Green2019/20

2018/19

Change

25.9

24.9

+4.0%

Comments••

Conventional

9.3

12.5

-26.1%

Total Automotive

35.1

37.4

-6.1%

••

China influenced by policies, weakereconomy, and insourcing by Tier 1
suppliers
New motor control, battery management
and charging system products developed
US passenger car sales continue to fall
Old sensor technology being replaced as
anticipated

05.11.201916

Automotive Segment
Regional Markets
GrowthCHF m

HY 2019/20
vs 2018/19Q2 2019/20
vs 2018/19

China

14.7

-18.9%-35.5%

Europe2.6+21.4%+10.2%

North America

5.7-32.0%-27.5%

RoW

12.0+39.0%+39.9%

Total

35.1

-6.1%

-15.0%

Sales
34%
42%

16%

8%

•H1 sales at CHF 35.1m, down 6.1% (at constant exchange rates, down 5.2%)•

China sales suffer due to changes in government policies and car launches, but
remains world’s largest market for green cars•

Europe benefits from electric/hybrid launches, RoW benefits from fuel cells andmotor control applications, US transitioning from old technology at a slower rate
05.11.201917

Automotive Segment: The Future

05.11.201918

Automotive Segment: The Transition“More fundamentally, efforts to decarbonize are set to shape the mediumterm outlook. A significant ramp-up of investment in the production ofelectric and other alternative-fuel vehicles is expected in the medium term,
particularly in Europe.
However, the supply chains for electric vehicles are several orders ofmagnitude shorter than those for fuel-powered vehicles.
Furthermore, entry-level prices remain higher than for fuel-powered cars,
which could limit demand uptake.
Accordingly, automakers are facing challenges that mean they will have to
make changes to business models above and beyond those required bytechnological reconfiguration.”(IMF, World Economic Outlook, October 2019)05.11.201919

Automotive next generation products
Battery management

HBCT

CAB 500 SF

Motor control

HC16

HAH3DRS07 SP 3

05.11.201920

AgendaOpening Remarks

Frank Rehfeld

Business PerformanceFrank Rehfeld

Financial Results

Andrea Borla

OutlookFrank Rehfeld

05.11.201921

Performance at a Glance

HY 2019/20

HY 2019/20
vs 2018/19

Q2 2019/20vs 2018/19

Orders

160.4

-3.4%

-10.1%

Sales

159.1

-5.9%

-5.6%

EBIT

31.8

-10.7%-11.2%Net profit

25.1

-8.2%

-18.9%

CHF m•

Sales impacted by challenging economic environment•

Profitability stable, with vigilance over SG&A costs•

EBIT margin 20.0% despite R&D increase of CHF 1.3m (9% of sales)•

Net profit decrease reflects EBIT, offset by lower China tax rate

05.11.201922

Gross Margin
CHF m16050%

Gross margin

HY2019/20

HY2018/19

Q2Q2
2019/20 2018/19

74.3

77.6

35.9

37.8

46.7%

45.9%

47.0%

46.7%

CHF m
14048%

Gross margin
in % of sales

12046%
10080

Gross margin up by 80 basis pts•

Efficiency gains in both material andlabour•Continued to shift production to costeffective locations

44%

60
42%
4040%
20

038%
15/16

16/17

17/18*

18/19

19/20

*restated

05.11.2019

23

SG&A
CHF m

6030%

SG&A

HY
2019/20

HY2018/19

Q2
Q2
2019/20 2018/19

28.3

29.1

13.6

14.3

17.8%

17.2%

17.8%

17.6%

CHF m

SG&A

50

in % of sales

4020%

3020

•

Remained vigilant with overheads•Reduced SG&A costs in line with thedrop in sales to CHF 28.3m (CHF 29.1m)

10%

1000%
15/16

16/17

17/18*

18/19

19/20

*restated

05.11.2019

24

R&D
CHF m

30

10%

R&D expense

HY2019/20

HY
2018/19

Q2
Q2
2019/20 2018/19

14.3

13.1

7.2

6.6

9.0%

7.7%

9.4%

8.1%

CHF m

R&D expense258%

in % of sales

6%•R&D expenses increased due to higher
headcounts and third party collaboration•Products in early launch phase•

Continued long-term investment infuture applications

20

154%
102%

500%
15/16

16/17

17/18*

18/19

19/20

*restated

05.11.201925

Financial Expense
HY2019/20

HY
2018/19

Q2
2019/20

Q2
2018/19

Exchange effect

(1.2)

(1.0)

(1.4)

0.1

Other financial expense & income

(0.2)

(0.1)

(0.1)

(0.0)

Total

(1.4)

(1.1)

(1.5)

0.1

CHF m•

Negative exchange effect of CHF -1.2m mainly caused by losses on USD andEUR

05.11.201926

Income Taxes
HY
2019/20

HY
2018/19

Expected income tax rate

16.3%

19.8%

Expected withholding tax rate

0.7%

1.0%

Expected tax rate17.0%

20.8%

Other differences

0.3%

-0.1%

Effective tax rate

17.3%

20.7%%•

Reduced tax rate mainly thanks to High New Technology Enterprise (HNTE)
status granted in China (15% tax rate) in January 2019•

IP re-organisation expected positive tax impact of around CHF 13 million for
2019/2005.11.201927

Income Statement

CHF m

HY
2019/20

HY
2018/19

ChangeQ2
2019/20

Q2
2018/19

Sales

159.1

169.0

-5.9%

76.4

80.9

46.7%

45.9%

+0.8%pt

47.0%

46.7%

Operating expense(42.6)(42.1)+1.2%(20.8)(20.8)

EBIT

31.835.6-10.7%

15.1

17.0

EBIT margin (in %)

20.0%

21.0%

-1.0%pt

19.8%

21.0%

Net financial exp.

(1.4)

(1.1)

+30.3%(1.5)

0.1

Income tax

(5.2)

(7.1)

-26.5%

(2.4)

(3.2)

Net profit

25.1

27.3

-8.2%

11.2

13.8

Net profit margin (in %)

15.8%

16.2%

-0.4%pt

14.7%

17.1%

Gross margin (in %)05.11.201928

Balance Sheet

30.9.2019

31.3.2019

Net working capital

54.1

56.2

Fixed assets

69.8

61.9

Noncurrent liabilities(20.6)(9.5)

Net operating assets

103.3108.6

Net cash/(debt)(22.9)

4.5

Equity

80.4

113.1

41.9%

60.5%

Days of Sales Outstanding

7475

Days of Inventory Outstanding

8792

Days of Payables Outstanding

37

41

CHF m

Equity ratio• Balance sheet remainsstrong• Net working capital
reduced with lower sales• Equity ratio impacted by
the dividend payment andcapitalization of the leases(IFRS 16 implementation)

05.11.201929

Cash Flow
HY2019/20

HY
2018/19

Profit before taxes

30.3

34.4

Adjustment for non-cash items and taxes paid

4.9

(1.4)

Cash flow from changes in net working capital(5.3)(10.6)Cash flow from operating activities

29.9

22.4

Cash flow from investing activities

(6.5)

(7.1)

Free cash flow

23.5

15.3

Cash flow from financing activities(18.1)(10.9)

Change in cash and cash equivalents

5.3

4.4

Cash and cash equivalents at the end of the period

17.1

20.9

CHF m

• Free cash flow up 53% at CHF 23.5m which reflects the underlying strength ofthe business05.11.201930

AgendaOpening Remarks

Frank Rehfeld

Business PerformanceFrank Rehfeld

Financial Results

Andrea Borla

OutlookFrank Rehfeld

05.11.201931

Outlook•

Global economic data for purchasing, manufacturing and trade, suggest that certain key
markets are on the cusp of a recession•

Economic environment to impact top line sales performance for the coming months,although we expect H2 2019/20 to be in line with our sales performance in the same
period of last year•

For FY 2019/20:•

we expect sales of around CHF 310m (CHF 321.6m FY 2018/19)•EBIT margin to remain close to 20%•

Fundamentals remain strong based on mega trends•

Green cars business has most growth potential•Continued investment in R&D, leveraging new technologies in electric powertrains,smarter sensors, DC metering and charging systems•Improve efficiency of production, empower global sites with full capabilities in R&D,
operations, sales and quality management
05.11.2019

32

Q&A

05.11.201933

Financial Calendar and Contact Details
The financial year runs from 1 April to 31 March

For further information

5 November 2019

Half year results 2019/20

Andrea Borla, CFO

31 January 2020

9 months results 2019/20

Phone: +41 22 706 12 50

19 May 2020

Full year results 2019/20

E-mail: investor@lem.com

9 June 2020

Annual General Meeting of Shareholders
for the financial year 2019/20

16 June 2020

Dividend ex-date

18 June 2020

Dividend payment date

05.11.201934

Appendix

05.11.201935

Shareholder Structure per
30 September 2019

30.6%

Werner O. Weber and Ueli Wampfler
0.2%

Ruth Wertheimer / 7-Industries Holding

3.2%

Columbia Threadneedle

3.2%

J. Safra Sarasin Investmentfonds
LEM Board and Management*

12.4%

50.5%

Other

* Excludes shareholdings of Ueli Wampfler and Werner C. Weber

05.11.201936