Half Year Report 2009/10
At the heart of power electronics

BUSINESS REPORT

Dear Shareholders,

The Industrial segment –				

Q2 shows improvements

LEM has started to be on the road to recovery in the second quarter of this fiscal

Sales in the Industrial segment reachedyear. Even though our sales are still at a

CHF 72.7 million compared to the CHF

low level of CHF 78.8 million compared101.9 million of the same period last year.

to the CHF 111.0 million of the first half

All markets were showing a negative

year of last year, we can see that for Q2

growth, however sales in the second quar-sales of CHF 43.2 million were up 21%

ter CHF 39.8 million were 21% higher thanfrom Q1 35.6 million. Please note that wein Q1 CHF 32.9 million. The European andare comparing to the first half of last year,

North American regions remain slow but

which was an absolute record half, just

we have seen Asia becoming stronger,

before the major economic recession.

sales in China are actually 15% above thepre-recession levels.

Our profitability has equally started to recover. Operational EBIT is CHF 8.6 mil-Sales in the Industry market have picked

lion, compared to 21.4 million last year,

up over the last months. Sales for thisbut Q2 outperforms Q1 by 70%.

market are still 28% behind the level ofthe same period last year. The areas of

We are happy to have achieved a return

renewable energies, the solar and windon sales of 10.9%. This confirms that we

power generation, have been recover-have taken the timely and adequate ac-

ing fast. The solar energy generation has

tions to reduce our cost base and adapt

been very successful in Europe and Japan

our production.

and we are seeing many new wind power
generation projects in USA and China.

The gross margin has improved from the

The new products that we have launchedfirst quarter and is 42.7%.

for this renewable market at the beginning of the year CAS, CASR and CKSR

The recession has been challenging forare performing very well and we need toLEM, its customers and its suppliers.

ramp up the production more rapidly thanplanned. These new projects have also al-

As a market leader, we have been able tolowed us to gain market share.

increase our market share substantially,

Our main market the electric motor drives

by more than 2 percentage points in ourare also recovering, which is a positive

Industry market and by even more in thesign for us. The area of welding and medi-

Traction market. Quality and service havecal applications are not yet taking off.

been the main drivers besides our traditional commercial, innovation and cost

The Traction market has been suffering

competitive strengths.

the least from the global economic crisis.
Sales have decreased ‘only’ by 12.8%
compared to the same period last year.
The relative weakness is mainly due to theworld wide decrease in needs for freight
locomotives. The Russian market has also
been hit by the recession and this is an important market for LEM. Sadly also some
European energy metering projects have3

been put on hold as the new EU norms

tive market and of the start of produc-

Sales in the Chinese market have picked

are being developed. We expect thesetion, as of August 2009, of two key cus-

up significantly and are now at the same

projects to resume as soon as the norms

tomers in USA and Japan. Both of theselevel as Germany !

are put into place. On-board energy me-

are for battery management applications.

tering is an interesting market for LEM.

We further depend on the success andstart of mass production for the so called

The Energy & Automation market has

green cars world wide. These cars will havealso been impacted by the recession as

5-10 times more transducer value than athe investments into factory automation

traditional battery management application.

and the need for our automation transducers have been low. The sales of our Sen-

Acquisition of
Danfysik ACP A/S
After 12 years of collaboration, LEM
acquired the Danish company Dan-

New state of the art

fysik ACP A/S at the end of July 2009.

progressed well and we have developed

facility in China andin order to strengthen the position of

new major customers for datacenters.

20 year anniversary

the LEM Group in the field of very highAlso WI-LEM, the wireless local energy
meter is now measuring energy con-

In September 2009 we held the official

Danfysik is the world’s leader in the de-sumption in French train stations.

opening ceremony for the new site invelopment and manufacturing of highest

Beijing, China. The new site covers an

precision current transducers for three

Automotive segmentarea of 10,000 m2 with a total produc-

main markets: medical scanners, preci-

2

also picks up in Q2tion area of 6,000 m . It incorporates thesion industrial motor controls and test &latest manufacturing technology and themeasurement. The operation is based

infrastructure for the future.

near Copenhagen in Denmark. So far

Sales in the Automotive segment were

The opening ceremony itself was attend-

the integration of LEM Danfysik has been

CHF 6.1 million, which is 33.4% behind

ed by leading Chinese and European

progressing well. Sales are in line withthe previous year, but again growth overofficials and was also the opportunity to

expectations and earnings are alreadythe quarters was substantial, Q2 withcelebrate LEM’s 20 year anniversary incontributing to the LEM Group profit.

22% more than Q1. We have benefited

China. Since 1998 the Beijing LEM sitefrom the general upswing in the Automo-

has been a fully owned LEM company.

tinel products for battery monitoring haveThis was a strategic bolt-on acquisition

precision current measurements. LEM

4

BUSINESS REPORT

Julius Renk new CFO

We will maintain our clear focus on cost

We would like to welcome Julius Renk

At the same time, the financial strength

as new CFO for the LEM Group. He hasof LEM will allow us to continue to build

started as of September 1, 2009 andup new markets, new applications andhas assumed the role of CFO taking overnew products and to continue to invest infrom Heinz Stübi, the interim CFO gradu-

the development of promising new busi-

ally. Julius Renk now has full responsibil-

ness.

reduction and the operational priorities.

ity. We would like to thank Heinz Stübi
for taking over the interim role and for his

Overall, we assume that the upturn will

hard work and dedication.

continue and that LEM will benefit fromthis in all 4 markets, maybe to a lesser
extent in the Traction market. At this time

Outlook

we expect sales for the year of about
CHF 170 to 180 million (CHF 197 million

It is difficult to give a forward looking

in 2008/09).

statement at this time as business ispicking up but from a very low base.

We would like to thank you for the con-

Our book to bill ratio has been over 1.09

tinued trust in LEM.

for both the first two quarters and this isa positive sign for the future business de-With kind regards,

velopment. We also see the increase indemand in all of our 4 markets.
Felix Bagdasarjanz
We firmly believe in our strategic direc-

Chairman of the Board			tion. The strategic drivers for our busi-

		ness remain intact :• the need for more energy and the demand for more renewable energy• the need for reliable energy and forPaul Van Iseghem

more controls and standby battery

President & CEO

management• the need for better energy efficiencies, increasing the demand for the
more efficient motor controls• the need for more mobility, public
transport and automotive with a shift
to more energy friendly solutions

5Interim Consolidated
Financial Statements

CONSOLIDATED BALANCE SHEET

Assets30.09.2009

31.03.2009

Current assets		Cash and cash equivalents
20’379Accounts receivable
36’237
Other current assets
1’963
Inventories
22’72927’95131’920
2’834
23’728In CHF thousands

Total current assets
81’308		Non-current assets		
Deferred tax assets
1’071
Other non-current assets
1’557
Property, plant and equipment
23’936
Intangible assets
10’41486’433

Total non-current assets

36’97829’778

Total assets

118’286

116’211		Liabilities and equity
30.09.2009

31.03.2009

In CHF thousands		Current liabilities		
Accounts payable
15’712Other current liabilities
545
Accrued expenses and deferred income
7’656
Current income tax payable
2’794
Current provisions
7’158
Current financial liabilities
9’327

12’614
290
6’406
6’247
3’151
93

Total current liabilities

43’19128’801

Non-current liabilities		
Non-current provisions
1’761
Other non-current liabilities
251
Deferred tax liabilities
1’766

2’012
113
1’793

Total non-current liabilities

3’778

3’918

Total liabilities
46’969		
Equity		Share capital
575
Treasury shares and derivative instruments on treasury shares(5’627)
Reserves and retained earnings
76’20332’719Equity attributable to equity holders of the parent
Minority interests

71’151165

83’297195

Equity71’316

83’492

Total liabilities and equity

118’286

116’2117

0
1’522
23’571
4’685

575(5’627)
88’349

CONSOLIDATED INCOME STATEMENT
April to September
2009/10

2008/09

78’816(45’132)

111’040(60’010)Gross margin
33’684
		Sales expense(9’199)Administration expense(10’920)
Research & development expense(5’094)
Other expense(65)
Other income
199

51’031(12’335)(12’143)(5’317)(2)
152

Operational EBIT

8’605

21’385

Revaluation SOP provision(4’810)

(102)

EBIT
3’796
		
Financial expense(162)
Financial income
19
Foreign exchange effect(594)

21’283

Profit before taxes

3’059

21’535

Income taxes(1’487)(5’541)

Net profit for the period
1’571		
Attributable to :		
LEM shareholders
1’553
Minority interests
18

15’994

Net profit

1’571

15’994

Net profit per share entitled to dividend (in CHF)
Basic net profit
Diluted net profit

1.36
1.36

13.94
13.88

In CHF thousands
Sales
Cost of goods sold

(200)
135
317

15’94548

		

8

CONSOLIDATED CASH FLOW STATEMENT
April to September
2009/10

2008/09		
CASH FLOW FROM OPERATING ACTIVITIES		Net profit of the year
1’571
Non-cash items
2’177
Cash flow before changes in net working capital
3’748
Cash flow from changes in net working capital
3’469

15’994
3’293
19’287(8’007)

Cash flow from operating activities

7’217

11’280Investment in fixed assets
Disposal of fixed assets and intangible assets
Acquisition of companies
Investment in intangible assets(3’220)67(1’213)(6’176)(4’131)36
0(138)

Cash flow from investing activities(10’542)(4’232)

Treasury shares aquired
Derivative instruments on own shares acquired
Dividends paid to the shareholders of LEM Holding SA
Dividends paid to minorities
Increase (+) in financial liabilities

00(11’372)
(48)
7’660

(3’875)(1’752)(12’650)
(42)
4’122

Cash flow from financing activities(3’760)(14’197)

Change in cash and cash equivalents(7’085)(7’150)Cash and cash equivalents at the beginning of the period

27’95125’787

In CHF thousands

CASH FLOW FROM INVESTING ACTIVITIESCASH FLOW FROM FINANCING ACTIVITIESExchange effect on cash and cash equivalents
Cash and cash equivalents at the end of the period

9

(488)

535

20’37919’172

CONSOLIDATED STATEMENT OFCOMPREHENSIVE INCOME
April to September
2009/10

2008/09

Net Profit for the period recognised in the income statement

1’571

15’994Currency translation difference(2’539)3’172

Fair value adjustments on cash flow hedges		

(125)

In CHF thousands

Total comprehensive income for the period(968)

19’040Attributable to shareholders(986)

18’98418

56

Attributable to minorities

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holder of the company
In CHF thousands

SharecapitalTreasurysharesPerformance
share plan

Fair value
reserve

Translation
reserve

Retainedearnings andother reserves

MinoritiyInterest

Total
equity1 April 2008
Total comprehensive income
Dividends paid
Dividends paid to minority interests
Performance share plan
Movement in treasury shares
Movement in derivative instruments
on treasury shares

575

0

0

146
(125)

(2'982)
3'164

73'26815'945(12'650)

201
56
(42)

71'20919'040(12'650)(42)517(3'875)(1'752)30 September 2008

575

(5'627)

517

21

182

76'563215

72'446

1 April 2009
Total comprehensive income
Dividends paid
Dividends paid to minority interests
Performance share plan575

(5'627)

423

(2)

3'464
(2'539)84'464
1'553(11'372)

195
18

83'492(968)(11'372)(48)
211

30 September 2009

575

517
(3'875)(1'752)(48)
211(5'627)

634

(2)

925

74'645165

71'316

10

NOTES TO THE INTERIM CONSOLIDATEDFINANCIAL STATEMENTS
1. Segment Information
April - September 2008

Industrial

Automotive

LEM Group Total

Orders received
Sales
EBIT

102’866
101’866
21’590

8’563
9’174
(307)

111’429
111’040
21’283

April - September 2009

Industrial

Automotive

LEM Group Total

In CHF thousands

In CHF thousands			
Orders received
Sales
EBIT

77’33972’7035’169

2. Nature of operations
The LEM Group is a market leader in providing innovative and highquality solutions for measuring electrical parameters. Its core products – current and voltage transducers – are used in a broad range
of applications in industrial, traction, energy and automotive markets.

3. Basic principles of group accounting
These unaudited consolidated financial statements for the six
months ended on September 30, 2009 have been prepared in accordance with International Accounting Standard (IAS) 34 ‘Interim
Financial Reporting’. They do not include all the information and disclosures presented in the annual consolidated financial statements
and should therefore be read in conjunction with the year that ended
31 March 2009.
The accounting and valuation policies are consistent with those applied in preparing the annual consolidated financial statements forthe year 2008/09, except where noted below.
The preparation of the interim consolidated financial statements requires management to make estimates and assumptions that affectthe reported amounts of revenues, expenses, assets and liabilities
and disclosure of contingent liabilities at the date of the financial
statements. If in the future such estimates and assumptions, which
are based on management’s best judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the
period in which the circumstances change.

6’176
6’113
(1’373)

83’51578’8163’796

4. Adjustments to new IAS/IFRS standards
and interpretations
The following new and revised standards and interpretations became effective for the reporting year 2009/10 :IFRIC 13

Customer Loyalty Programmes

IFRIC 15
		

Agreements for the Constructionof Real Estate

IFRIC 16		Hedges of Net Investment in
a Foreign Operation

IFRS 8Operating Segments

IAS 1 revised

Presentation of Financial Statement

IAS 23

Borrowing Costs

Amendment to IFRS 2

Vesting Conditions and Cancellations

Amendments to IAS 32 Puttable Financial Instruments andand IAS 1
Obligations Arising on Liquidation
Amendments to IFRS 1 Cost of an Investment in a Subsidiary,and IAS 27
Jointly Controlled Entity or Associate
IFRIC 18

Transfers of Assets from Customers

Amendments to IFRIC 9 Embedded Derivatives
and IAS 39
Amendments to IFRS 7 Improving Disclosures about		Financial Instruments
Annual Improvements to IFRS’s
These changes led to additional disclosures but do not have material effect on the consolidated financial statements of the LEM Group.
Amendments to IFRS 3 ‘Business Combinations’ are effective forfinancial years beginning on or after 1 July 2009. For the LEM Groupthey are therefore only relevant for the business year beginning
1 April 2010.

11

5. Income taxes
Income tax expense is calculated based on the best estimate of theapplicable annual income tax rate expected for the full year.
The increase in the effective tax rate of LEM Group is caused bychanges in volumes, product mix and profitability of the Group’s
subsidiaries in the various jurisdictions and withholding taxes on
dividends distributable out of prior year’s profits within the Group.

6.

Financial Liabilities

LEM Group increased financial short-term liabilities to CHF 9.3 million (31 March 2009 CHF 0.1 million) mainly as a bridge financing forthe acquisition of Danfysik ACP A/S.

7.

Shareholders’ equity

At the shareholders’ meeting held in Geneva on 26 June 2009, theshareholders approved the distribution of an ordinary dividend of
CHF 10.00 per share. The gross dividend paid on 29 June 2009amounted to CHF 11.37 million (prior year : ordinary dividend of
CHF 7.00 and extra-ordinary dividend of CHF 4.00 per share ; total
CHF 12.65 million).

8. Performance Share Plan
In the half year 2009/10 expense of CHF 211 thousand was charged
to the income statement based on the fair value at grant date of Performance Share Plan 1 (2008/09 CHF 517 thousand). The details of
this plan were disclosed in the Annual Report 2008/09 as well as theinterim consolidated financial statements of 30 September 2008.
On 8 May 2009 the Board of Directors decided not to continue the
Performance Share Plan in the present form. The new LEM Incentive Scheme (LIS) consists of a cash bonus based on the Economic
Value Added of LEM Group over a period of 3 years.

The acquired intellectual property rights are depreciated over 5
years according to LEM accounting policies.

in CHF thousands
Carrying
Fair value Fair value on		amount adjustments
acquisition				
Cash and cash equivalents

338

0

338

Trade accounts receivable

1’025

-99

926

Inventories

2’744

-298

2’446

Other current assets

530

-353

177

Property, plant and equipment

379

3

383

Intangible assets

5’943

207

6’150

Pre-acquisition goodwill

2’804-2’8040

Current liabilities

2’281

163

2’444

Long-term liabilities

129

0

129

Net assets acquired
at fair value			

7’846

Goodwill / (Badwill)			

-149

Total purchase consideration,
including transaction costs			

7’697

Less cash andcash equivalents acquired			-338

Net cash outflow on acquisition			

7’359

In the previous year the following change in the scope of consolidation occurred:
Creation of LEM Management Services S.a.r.l., fully consolidated asof 16 June 2008.

9. Changes in scope of consolidation
During the first half year of 2009/10 the scope of consolidation
changed as follows :On 28 July 2009 LEM Holding SA acquired 100% of the shares ofDanfysik ACP A/S in Denmark retroactively per 1 July 2009. The
business of high precision transducers was integrated into the business segment Industrial of LEM Group. The total purchase pricefor the shares and the intellectual property rights amounts to CHF
7.0 million incl. transaction costs and was paid out of existing liquid
funds and two bridge financings of EUR 2.0 million each for a periodof 3 and 6 months.
In the period from 1 July to 30 September 2009, the acquired business employing 15 people generated third party sales of CHF 1.32
million and a net profit of CHF 0.05 million.
The following table shows the fair value of assets and liabilities acquired in the share deal at the effective date of acquisition, as well as
the intangibles acquired and the badwill arising from the transaction.
As the purchase price allocation has not been finalised at the reporting date, the amounts are subject to adjustments.

10. Events after the balance sheet date
The Board of Directors and Senior Management are not aware ofany significant events up to the date of approval of the consolidated
financial statements on 30 October 2009 that would require an adjustment in carrying amounts of the Group’s assets and liabilities.

11. Exchange rates
The following exchange rates were used :Period-end rate
for balance sheet

Period average rate
for income statement

30.09.09

31.03.09

2009/10

2008/09

EUR

1.511

1.517

1.517

1.612

GBP

1.649

1.633

1.73

2.032

JPY

0.01150.01180.0114

0.01

USD

1.036

1.149

1.088

1.05

RUB

0.034

0.034

0.034

0.044

CNY

0.152

0.168

0.160

0.153

12

Postal address
LEM Holding SA
P.O. BOX 785
CH – 1212 Grand-Lancy 1

Visitors address
LEM Holding SA
8, chemin des Aulx
CH – 1228 Plan-les-Ouates
Phone +41 22 706 11 11
Fax+41 22 794 94 78