Half Year Report 2008/09
At the heart of power electronics

BUSINESS REPORT

Dear Shareholders,		
The current economic environment creates an important levelof uncertainty about the future developments in our market.
Despite this fact we are pleased to report a successful firsthalf year 2008/09 of our company LEM. As a consequence of
our effective business strategy, consistent cost management
and a still favorable economy during the past six months
we have achieved a good performance on both the top andbottom line.
In the reporting period sales have reached CHF 111.0 million
representing an increase of 12.7% compared to the same
period last year with CHF 98.5 million. At constant exchange
rates growth was 17.5%.
Our book to bill ratio was at 1.0, which means in the first halfof the year we had about the same level of orders as sales.
If we compare the two consecutive quarters of this fiscal
year we see that the level of sales remained stable at around
CHF 55.5 million for both quarters. These were record quarters for us.
The gross margin remains stable, increasing by 0.3 percentage points to reach 46.0% compared to 45.7% in the firsthalf of last year.
At the same time our growth remains profitable as we havereached an EBIT of CHF 21.3 million which is an increaseof 18.5%.
Our net earnings are CHF 16.0 million up 29.8% from CHF
12.3 million in the same period last year. The tax rate improved from 31.8% to 25.7%.

The Industrial Segment –growth in all markets
Sales growth in the Industrial Segment remained robust
reaching CHF 101.9 million, an increase of 15.7% comparedto the first half of last year. Europe remained our most important region and showed significant growth of 21.9% followedby Asia with a growth of 11.6%, North America remained flatwith a decrease of -1.8%.
The Industry market is key for LEM. Sales increased by 10%
compared to the same period last year. The main market for
LEM transducers remain the electric motor drives. Our products are essential to regulate the motor’s speed, while at thesame time saving about 30-40% in energy consumption.
The renewable energies are an area of continued growth forLEM. We have seen an increase of 60% from the same period
last year. Our products help to convert the energy generated
by these sources and ensure safe and high quality electricity
to the grid.
The strongest growth was in the Traction market, where weincreased our sales by 31.3%. This achievement is due tothe global investments in the areas of transportation both forgoods and passengers. Furthermore, the need for energy efficiency is now also extending into the Traction market and
we see a strong demand for our EM4T – Energy Meter for
Traction. We have just launched a new product the DV, whichis the first Class 1 certified DC Voltage transducer. Class 1means that the transducer is certified for billing purposes. We
are proud to offer a product which is the smallest, the mosteconomic, and highly reliable to fulfill all the requirements forthis market.
Sales in the Energy & Automation market continue to develop well and increased by 78.7% versus the same period lastyear. The main growth has been for DC current measurementof the strings of solar panels for photovoltaic applications.
This is to ensure that they are all working properly and are
well oriented to the sun.

BUSINESS REPORT

Automotive – unfavorable market
conditions, good design-in progress

China – strong growth continues

The Automotive Segment continued to be impacted by the poor

whilst our production volumes increased by 141% to CHF 32.4

performance of the US car market and a weak US dollar. Themillion.

first half of 2008/09 showed a negative growth of -12.2% which

We have just achieved our IRIS (International Railway Industry

resulted in a total sales of CHF 9.2 million (CHF 10.4 million). AtStandard) certification for our factory in Beijing and were theconstant exchange rates growth was -5.1%.

first company to do this with the new standards. With over 400

Comparing the two first quarters of the fiscal year we see ancolleagues in China, Beijing is our largest LEM site.

Sales in the Chinese market grew by 36% to CHF 13.4 million

increase of sales of 15.3% from CHF 4.3 million in Q1 to CHF
4.9 million in Q2.

The BRIC (Brazil, Russia, India and China) countries continue todevelop well. Sales have increased by 29.4% compared to theGoing forward we continue to broaden our customer base. Weprevious half year. Growth was particularly high in Russia.

have just started to deliver our products for Battery Management to new sedan platforms in USA, Europe and Asia.
We have several projects that will commence delivery in late
2009/10 for sedans, electric and hybrid electric vehicles in USA,Asia and Europe.
We have also achieved price increases for deliveries in US Dollars.

BUSINESS REPORT

Outlook
It is difficult to make a precise outlook statement at this junctionof financial and economic uncertainties. We are confident tohave a good strategy in place, which remains the tailwind for
LEM’s development.
The turmoil in the global markets is also affecting our company.
For the full year we expect sales to be about CHF 190 million(CHF 203 million in 2007/08).
We are focusing on our new markets to foster growth, and at
the same time we have started to reduce our cost base.
We would like to thank you for your continued trust in LEM.
With kind regards,

Felix Bagdasarjanz

Paul Van Iseghem

Chairman of the Board President and CEOInterim Consolidated
Financial Statements

CONSOLIDATED BALANCE SHEETAssets	30.09.2008	31.03.2008

1TCHF

TCHF

Current assets		Cash and cash equivalents
19’172
Trade debtors and other debtors
49’442Other current assets
2’786
Inventories
32’84725’78741’1692’051
22’411

Total current assets
104’248		
Non-current assets		
Deferred tax assets
145
Other financial assets
1’507
Property, plant and equipment
20’913
Intangible assets
4’394

91’418165
1’496
18’450
4’429

Total non-current assets	26’960	24’541
Total assets

131’207

115’959		
Liabilities and equity	30.09.2008	31.03.2008
TCHF		
Short-term liabilities		Trade and other payables
23’215
Other short-term liabilities
402
Accrued expenses and deferred income
12’984Current income tax payable
3’959
Short-term provisions
4’154
Short-term financial liabilities
6’298

TCHF

17’034
650
9’639
4’798
3’416
2’087

Total short-term liabilities
51’012	37’624		
Long-term liabilities		
Long-term provisions
5’981
5’395
Other long-term liabilities
11077
Deferred tax liabilities
1’658
1’653
Total long-term liabilities

7’749

7’125

Total liabilities
58’761	44’749		
Equity		Share capital575
575
Reserves
14’127
16’200Retained earnings
57’52954’233Equity attributable to equity holders of the parent
Minority interests

72’231215

71’008201

Equity72’446	

71’209Total liabilities and equity

131’207

115’959

1

Adjusted due to the introduction of IFRIC 14, see note 2

CONSOLIDATED INCOME STATEMENT
April to September	2008/09	2007/08

Sales
Cost of goods sold

TCHF

TCHF

111’040(60’010)

98’513(53’455)

Gross margin
51’031	45’058		
Sales expense(12’617)(11’050)
Administration expense(11’913)(11’290)
Research & development expense(5’367)(5’071)Other expense(2)(13)
Other income
152
331
Operating profit	21’283			
Financial expense(200)
Financial income
135
Exchange effect317

17’965

Earnings before taxes	21’535

18’074

Income taxes(5’541)(5’755)Net earnings
15’994			
Attributable to :		
LEM shareholders
15’945
Minority interests48

12’318(570)
136542

12’28137

Net earnings
15’994	
12’318			
Earnings per share
CHF
CHF
Earnings per share undiluted
13.9
10.7
Earnings per share diluted
13.9
10.4



CONSOLIDATED CASH FLOW STATEMENT
April to September	2008/09	2007/08
TCHF

TCHF

CASH FLOW FROM OPERATING ACTIVITIES		Net earnings
15’994
Adjustment for non-cash items		
- Current income taxes
5’604- Net financial result
65- Expenses for share-based payments
1’135- Depreciation and amortisation
2’386- Increase (+) / decrease (-) of provisions and deferred taxes
951
Interest received
135Interest paid
(200)
Taxes paid
(6’453)
Expenses for cash settlement of options(206)
Cash flow before changes in net working capital
19’412	
Change in inventory(9’342)
Change in debtors and other current assets(8’047)
Change in payables and current liabilities
9’382
Cash flow from changes in net working capital(8’007)

12’318
5’216
433
550
2’221
50
136(570)(3’548)(5’442)
11’366(1’507)
1’160(2’495)(2’842)

Cash flow from operating activities

11’4058’524

Investment in tangible fixed assets
Disposal of tangible and intangible fixed assets
Investment in intangible fixed assets
Increase (-) / decrease (+) in long-term financial assets(4’131)36(138)0(3’270)
83(416)(5)

Cash flow from investing activities(4’232)(3’608)Purchase of treasury shares
Purchase of options on treasury shares
Dividends paid to the shareholders of LEM Holding SA
Dividends paid to minorities
Derivative financial instruments
Increase (+) in financial liabilities
Decrease (-) in financial liabilities(3’875)(1’752)(12’650)
(42)
(125)
4’122
000
(5’175)
(38)
0
1’187
(7’260)Cash flow from financing activities(14’323)(11’286)

Change in cash and cash equivalents(7’150)(6’370)Cash and cash equivalents at the beginning of the period	25’78719’799

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535(201)

19’172	

13’227

SEGMENT INFORMATION –CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Segment information
April - September 2007

Industrial

Automotive

LEM Group Total

97’97788’06917’70311’07810’444262

109’055
98’51317’965

Industrial

Automotive

LEM Group Total

TCHF
Orders received
Sales
EBIT
April - September 2008

TCHF			Orders received
Sales
EBIT

102’866
101’866
21’590

8’563
9’174(307)111’429
111’040
21’283

Consolidated statement of changes in equity
Attributable to equity holder of the company
TCHF

Sharecapital

1

Balance on 1 April 2007
Changes in capital
Dividends paid
Dividends paid to minority interests
Attribution of earnings
Currency translation difference
Stock option plan
Treasury shares600(25)

1575

Balance on 30 September 2007

CapitalReserve
reserves for treasury
sharesTreasurysharesReservefor derivative

Stockoption
plan

Currencytranslation
diff.

Retainedearnings

MinoritiyInterestTotalequity

19’00925(7’820)

01’4292’098

42’440

178

(38)
37

65’7540(5’175)(38)
12’318(1’138)(4’892)0177

66’8297’820(5’175)12’281(1’138)(59)

19’034(7820)

7’820

000(4’833)

1’370

960

There of P&L items recorded in equity
1Balance on 1 April 2008
Dividends paid
Dividends paid to minority interests
Attribution of earnings
Currency translation difference
Derivative financial instruments
Performance share plan
Treasury shares
Treasury shares (options)

575

Balance on 30 September 2008
There of P&L items recorded in equity

144’713(1’138)

19’03400

146

0(2’982)(1’138)54’234(12’650)201

15’945

(42)
48
8215

3’164
(125)
517
(3’875)

3’875(3’875)(1’752)575

15’1593’875(5’627)

21517

182

57’529

00

0

0

00

3’164

0

71’209(12’650)(42)
15’994
3’172
(125)
517
(3’875)(1’752)72’446
3’164

Adjusted due to the introduction of IFRIC 14, see note 2		NOTES TO THE INTERIM CONSOLIDATEDFINANCIAL STATEMENTS
Income Statement

1. Nature of operations
The LEM Group (the Group) is a market leader in providing innovative and high quality 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

TCHF

01.04.2007 – 31.03.2008

Administrative expense (before restatement)
Restatement IFRIC 14

26’332(274)

Administrative expense (restated)

26’058Deferred tax (before restatement)

470

2. Basic principles of Group accounting
These unaudited consolidated financial statements for the six
months ended on September 30, 2008 have been prepared in accordance with International Accounting Standard IAS-34 ‘Interim
Reporting’.

Restatement IFRIC 1455

Deferred Tax (restated)

525

The accounting and valuation policies are consistent with those applied for the 2007/08 Annual report except for the adoption of thenew IFRIC 14.

Net earnings (before restatement)
Restatement IFRIC 14219

The change relates to:

Net earnings (restated)

21’911– IFRIC 14/IAS 19 – The limit on a defined Benefit asset, Minimum
Funding Requirements and Their Interaction: This Interpretation
outlines the assessment of the maximum surplus in a definedbenefit plan that pursuant to IAS 19 allows employee benefits tobe recognised as an asset. According to the provisions of IFRIC
14, the Group recognised an adjustment to retained earnings asof 1 April 2007 of TCHF 874.
The impact of the introduction of IFRIC 14 on the Group’s consolidated balance sheet and statement of income is shown below.

21’692

Diluted/Undiluted Earnings Per Share (before restatement)

18.4

Diluted/Undiluted Earnings Per Share (restated)

18.6

3. Income taxes
The variation in the Groups effective tax rate is caused by changes
in volumes, product mix and profitability of the Groups subsidiaries
in the various jurisdictions and the change in the applicable statutory tax rate in some countries.

Balance Sheet
TCHF

01.04.2007

30.09.2007

31.03.2008

Other financial assets(before restatement)

73

76

130

Restatement IFRIC 14

1’092

1’092

1’366

Other financial assets(restated)

1’165

1’168

1’496

Deferred Tax Liabilities(before restatement)

1’607

1’604

1’380

Restatement IFRIC 14

218218273

Deferred Tax Liabilities(restated)

1’825

1’822

1’653

Retained Earnings(before restatement)

41’56543’83953’140

Restatement IFRIC 14874874

1’093

42’43944’71354’233

10The Group increased financial liabilities in LEM Holding SA by TCHF
4’211, bearing an interest rate of libor + 0.60%.

5. Shareholders’ equity
Dividend

Total effect on the Retained Earnings

Retained Earnings(restated)

4. Financial liabilities

At the shareholders’ meeting held in Geneva on 27 June, 2008, theshareholders approved the distribution of an ordinary dividend ofCHF 7.00 per share followed by an extraordinary dividend of CHF
4.00 per share. The ex-dividend day was 30 June, 2008. The totalamount spent for the gross dividend was TCHF 12’650.

6. Performance Share Plan

7. Changes in scope of consolidation

On 27 June, 2008 the Board of Directors decided to initiate a Performance Share Plan (PSP) for 30 members of the management.

During the first half year of 2008/09 the scope of consolidation
changed as follows :The number of shares granted under this plan will be transferredto the employees after a vesting period of three years. The plan isequity settled.

- Creation of LEM Management Services Sarl, fully consolidated asof 16. June 2008.

The number of the shares eventually vested will depend on theachievement of certain performance targets, determined based onan Economic Value Added (EVA) model, which is expected to reflect
the market value growth of LEM.

8. Events after the balance sheet date

The fair value of the PSP will be recorded in the Income Statement
straight-line over the 3 year vesting period. The expense is adjusted
at every reporting date based on the expected number of sharesthat will be granted.

Between the balance sheet reference and the approval of the consolidated financial statements by the Board of Directors on October30, 2008, no further significant events occurred which might makethe 2008/09 consolidated financial statements for the six months
ending on September 30, 2008 less meaningful or which would
warrant disclosure at this point.

9. Exchange rates
Terms of PSP

PSP – 2008/09

Number of shares granted		
Vesting period		
Allocated to recipients		
Fair value per unit (CHF)		

The following exchange rates were used :8’960
3 years
27.06.2008
303.5

In the half year 2008/09, an expense of TCHF 517 was charged tothe income statement based on the fair value at grant date of PSP.
In order to fund the PSP program, LEM has purchased 12’400
treasury shares at a share price of CHF 312.50 and purchased call
options on own shares as follows :Period-end rate
for balance sheet

Period average rate
for income statement

30.09.08

31.03.08

2008/09

2007/08
1.648

EUR

1.585

1.57

1.612

GBP

1.99

1.99

2.032

2.425

JPY

0.01

0.01

0.01

0.0102

USD

1.097

1.0

1.05

1.211

RUB

0.044

0.042

0.044

0.047

CNY

0.161

0.142

0.153

0.159

Terms of Options
Transaction
date

Numberof options

Strikeprice

Premiumpaid

Excercise period

20.9.2008

15’000360

61.70

1.3.2011 - 30.4.2013

20.9.2008

15’000390

55.10

1.3.2012 - 30.4.2013

The call options which were acquired are intended to be gross settled and they are therefore treated as equity instruments.

11

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 78
www.lem.com