Half Year Report
2012/13
At the heart of power electronics

LEM | Half Year Report 2012/13

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Business Report
Dear Shareholders,
The first half year 2012/13 has confirmed the trend we projected last year: LEM delivers stable results
in a market environment with low visibility. Our clients face uncertainty due to the economic slowdown
mainly brought on by the sovereign debt crisis in Europe. Today, the global political and economic
implications of the crisis remain unclear and make long-term planning difficult.
This lack of visibility has resulted in our customers requiring increased flexibility in terms of timing anddelivery volumes. We anticipated clients’ short-term orders and positioned ourselves accordingly. We
have carefully managed our supply chain and held sufficient raw material and subcomponents in stockin order to accommodate the volatile demand of our customers.
Our sales decreased by 1.0% to CHF 124.2 million. At constant exchange rates, sales decreased by
7.3%. Reported bookings for the first six months of 2012/13 compared to the first half year of 2011/12
increased by 49.8% to CHF 120.5 million. The Q2 book-to-bill ratio was at 0.98. For the six-month
period, we observed that clients kept their stocks at very low levels and minimized their engagement.
The gross margin increased from 40.5% in the first half of 2011/12 to 42.9% in the first half of 2012/13.
The operational EBIT for the first half year of 2012/13 was CHF 23.8 million, an increase of 24.1%
year on year. This means we achieved an operating EBIT margin of 19.2%, which is within our target
range of 15– 20%.
Net profit for the first six months of 2012/13 was CHF 20.5 million, an increase of 36.6% comparedto the first half year of 2011/12.
Industry segment: robust sales in North America and Asia compensate for weak European sales
Sales in the Industry segment reached CHF 106.0 million in the first six months of 2012/13, a decreaseof 6.4% compared with the first half of 2011/12. At constant exchange rates, sales decreased by
11.7%. Thanks to improved production efficiency and ramp-up of production of new products, theoperational EBIT for the first half year increased by 15.4% to CHF 21.0 million. Europe remains ourbiggest market, accounting for 48% of sales, followed by China with 19%. Sales declined in Europe(–14%), grew in China (+6%) and remained stable in the rest of Asia and grew in North America (+12%).
_ Sales decreased in the drives & welding business by 18% compared to last year. Europe was weakest,
decreasing 27%, with Italy and Germany being hit the hardest.
_ The renewable energies & power supplies business recovered during late spring but slowed down
again in summer. Sales increased by 13% compared to last year. Whereas Europe weakened insolar, we observed growth in Asia, mainly China and Japan, and in North America. We observed
two trends in the renewable energies business: first, growing capacities of solar power plants andthe relocation of production from Europe to North America, China and Japan; second, higher requirements for environmental compatibility and accuracy driven by off-shore wind parks.
_ The traction business decreased (– 6%), mainly due to weak European demand following the credit
constraints and prolonged delays in China.
_ Sales in high-precision business decreased (–3%). Europe and North America were stable whereas
demand weakened in Asia for test & measurement.
Automotive segment: conventional cars business exceed expectations
Sales in the Automotive segment reached CHF 18.2 million, a growth of 48.4% compared to last year.
At constant exchange rates, sales increased by 33.0%. Due to our focus on Asian and North American
manufacturers, Automotive results have not been strongly impacted by the weak European car market.
_ Our growth can mainly be attributed to a strong performance with battery management applications in the conventional cars business, whereas we noticed an increasing number of delays or evensuspensions of new projects in the green cars business. In the conventional cars business, oursales grew by 52.2% compared to the first half of 2011/12. We achieved this result by winning market
share and by extending the numbers of platforms with existing and new customers. We continue tobe the market leader in the USA and have a very good market position in Asia.
LEM | Half Year Report 2012/13

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_ In the green cars business (hybrid electrical and electrical vehicles), sales grew by 34.1% comparedto the first half of 2011/12.
Strategy implementation on track
In the first half year, we made progress in implementing our strategic initiatives that will serve toincrease LEM’s competitive advantage:_ Increase technology leadershipWith the launch of three products in the first half year 2012/13, we remain on track with our goal tolaunch new products that offer either improved performance or reduced costs for our customers. A
new open-loop-based product, HO, uses our new ASIC generation delivering higher precision thanpreviously. It also offers new functionalities like overcurrent detection and stand-by mode. Furthermore, it is programmable, which represents a breakthrough in our sensor market. For the traction
market, we developed a new voltage transducer, the DVL, in collaboration with key customers. This
voltage transducer offers an improved performance based on new digital technology. Another new
product, HFWS 63, has been designed for a smart-grid-management application.
The increased number of product launches is the result of our continued focus on innovation. We
have invested CHF 6.9 million in R&D in the first half of 2012/13, representing 5.6% of sales.
_ Increase efficiency
In 2009 LEM acquired Danfysik ACP A/S in Denmark. After its successful integration into LEM Group
we decided to centralize the high-precision production. In summer 2012, we finalized the relocation of our production center from Denmark to Geneva. This grouping of production will reduce
costs and facilitate efficiency improvements in the supply chain. During the relocation, we maintained product quality on its high level and assured uninterrupted on-time delivery of our products.
_ Increase production flexibility
In order to be able to deal with the increased volatility in our markets, we improved our planningand forecasting procedures with our sales & operations planning process (S&OP). This program isbased on close cooperation between the sales and operations teams and enables more precise
planning of our production capacities and inventories.
Transfer of seat
According to the decision taken by the shareholders at the annual shareholders’ meeting on 28 June2012 we initiated the transfer of the seat of LEM Holding SA from Plan-les-Ouates to Fribourg. The
implementation progresses according to plan and will be finalized before our next annual shareholders’meeting taking place on 27 June 2013 in Fribourg.
OutlookIn the second half of 2012/13 we expect a decrease of sales in the Industry segment as a consequence of the economic slowdown. Nevertheless, thanks to the introduction of new products we
intend to continue strengthening our market share. Sales in the Automotive segment are expected
to remain above last year’s level. Our main challenge for the second half of 2012/13 will be to adapt
production to the short-term planning of our customers.
For the full financial year 2012/13, we forecast sales of CHF 230 to 240 million, compared to lastyear’s sales of CHF 236.3 million.
Despite the persistent volatility of our markets and the difficult economic environment, we remain
confident about the potential of LEM. We are well-positioned to meet the needs of our customers
due to our innovation capacity, our global organization and our increased efficiency.
We would like to thank you for your continued trust in LEM.
With kind regards,

Felix Bagdasarjanz
Chairman of the Board of Directors

François Gabella
Chief Executive Officer
LEM | Half Year Report 2012/13

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Financial Results
April to September
2012/13

2011/12 1

Sales
Cost of goods sold
Gross margin124'195(70'892)
53'302125'511(74'736)
50'775

Sales expense
Administration expense
Research & development expense
Other expense
Other income
Operational EBIT

(11'536)(11'037)(6'923)(150)
173
23'829(12'138)(11'953)(7'529)(145)
183
19'1940619

23'82919'813

(58)
51
722

(172)
46
(1'035)

Profit before taxes

24'54418'651

Income taxes(4'015)(3'624)

Net profit of the period

20'52915'028In CHF thousands

Additional SOP costs/income
EBIT
Financial expense
Financial income
Foreign exchange effect1

Reclassification for comparative information. Please refer to note 9.

LEM | Half Year Report 2012/13

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Interim
Consolidated
Financial
Statements

LEM | Half Year Report 2012/13

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Consolidated Statement of
Financial Position
AssetsIn CHF thousands

30.09.12

31.03.12

Current assets
Cash and cash equivalents
Accounts receivable
Inventories
Income tax receivable
Other current assets
Total current assets

12'42146'62930'814833
1'610
92'306

21'12142'14026'605
2'009
2'956
94'831

Non-current assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Other non-current assets
Total non-current assets

3'906
24'665
6'253
7'478
42'302

3'485
24'173
6'657
3'368
37'683

Total assets

134'608

132'514

In CHF thousands

30.09.12

31.03.12

Current liabilities
Accounts payable
Accrued expenses
Current income tax payable
Current provisions
Current financial liabilities
Other current liabilities
Total current liabilities

23'08215'726
10'050
2'761
5'033
260
56'912

17'86314'855
8'244
3'043
3'000
632
47'637

Non-current liabilities
Non-current provisions
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities

441
2'362
639
3'441

457
4'217
642
5'316

Total liabilities

60'35352'953Liabilities and equity

EquityShare capital
Treasury shares and derivative instruments on treasury shares
Reserves
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity

570
(878)
12'68861'87574'255570(1'984)
11'42569'55079'56174'25579'561

Total liabilities and equity

134'608

132'514

LEM | Half Year Report 2012/13

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Consolidated Income Statement
April to September
2012/13

2011/12 1

Sales
Cost of goods sold
Gross margin124'195(70'892)
53'302125'511(74'736)
50'775

Sales expense
Administration expense
Research & development expense
Other expense
Other income
Operating profit(11'536)(11'037)(6'923)(150)
173
23'829(12'074)(11'440)(7'486)(145)
183
19'813

(58)
51
722

(172)
46
(1'035)

Profit before taxes

24'54418'651

Income taxes(4'015)(3'624)

Net profit for the period

20'52915'028Attributable to:
LEM shareholders
Net profit for the period

20'52920'52915'02815'028

Basic and diluted earnings per share, in CHF

18.06

13.25

In CHF thousands

Financial expense
Financial income
Foreign exchange effect1

Reclassification for comparative information. Please refer to note 9.

LEM | Half Year Report 2012/13

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Consolidated Cash Flow Statement
April to September
In CHF thousands

2012/13

2011/12

Cash flow from operating activities
Profit before taxes
Adjustment for non-cash items and taxes paid
Cash flow from changes in net working capital
Cash flow from operating activities

24'544125(1'630)23'03918'65190(4'112)
14'629Cash flow from investing activities
Investment in fixed assets
Investment in intangible assets
Increase (–) / decrease (+) in other assets
Cash flow from investing activities(3'172)(163)(4'110)(7'445)(5'309)(189)
0(5'498)Cash flow from financing activities
Treasury shares acquired (–) / divested (+)
Dividends paid to the shareholders of LEM Holding SA
Increase (+) / decrease (–) in financial liabilities
Cash flow from financing activities

1'276(28'374)
2'000(25'098)(665)(45'461)
21'000(25'126)

Change in cash and cash equivalents(9'504)(15'995)

Cash and cash equivalents at the beginning of the period
Exchange effect on cash and cash equivalents
Cash and cash equivalents at the end of the period

21'121771
12'38826'613(12)
10'606

LEM | Half Year Report 2012/13

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Consolidated Statement ofComprehensive Income
April to September
In CHF thousands

2012/13

2011/12Net profit for the period recognized in the income statement

20'52915'028Currency translation difference

1'264

275

Total comprehensive income for the period
Attributable to shareholders

21'79221'79215'30315'303

Consolidated Statement of
Changes in Equity
Attributable to equity holder of the company

Share capital

Treasury shares

Share plan

Translation
reserve

1 April 2011
Net profit of the period
Other comprehensive income
Total comprehensive income
Changes in capital
Dividends paid
Performance share plan
Purchase and sales oftreasury shares

575(7'091)

1'556(2'676)30 September 2011
1 April 2012
Net profit of the period
Other comprehensive income
Total comprehensive income
Dividends paid
Purchase and sales of treasury
shares30 September 2012

In CHF thousands

Retainedearnings andother reserves

275
275
(5)

3'968

104'549
15'028

Total equity

15'028(3'963)(45'461)(216)(5)

96'91315'028275
15'303(0)(45'461)
(91)
(670)

1'681
(665)

(1'556)570(2'107)0(2'401)

69'93265'994570(1'984)0(2'502)83'477
20'52920'529(28'374)170

79'561
20'5291'264
21'792(28'374)
1'276

75'80274'255

1'264
1'264
1'106
570

(878)

0

(1'238)

LEM | Half Year Report 2012/13

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Notes to the Interim Consolidated
Financial Statements
1 Nature of operations
LEM Group is a market leader in providing innovative andhigh-quality solutions for measuring electrical parameters.
Its core products – current and voltage transducers – are used
in a broad range of applications in drives & welding, renewable energies & power supplies, traction, high precision, conventional and green cars businesses.
2 Basic principles of group accounting
These unaudited consolidated financial statements for thesix months ended on 30 September 2012 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 beread in conjunction with the year ended 31 March 2012.
The accounting and valuation policies are consistent withthose applied in preparing the annual consolidated financial

4 Adjustments to new IAS/IFRS standards and interpretations
The following new and revised standards and interpretations
became effective for the reporting year 2012/13:_ Amendments to IAS 12 “Deferred Tax”: Recovery of underlying assets provide a practical approach for measuring
deferred tax liabilities and deferred tax assets wheninvestment property is measured using the fair value
model.
_ Amendments to IFRS 1: Severe Hyperinflation andRemoval of Fixed Dates for First-time Adopters provide
relief from having to reconstruct transactions that occurred
before the date of transition to IFRSs.
_ Amendments to IFRS 7 “Disclosures”: Transfers of financial assets require disclosures to help users of financial
statements evaluate the risk exposures relating to transfers of financial assets and the effect of those risks on an
entity’s financial position.

statements for the year 2011/12, except where noted below.
The preparation of the interim consolidated financial statements requires management to make estimates and assumptions that affect the 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.
In accordance with IAS 1 “Presentation of Financial Statements,” the financial information is presented in thousandsof CHF. The totals are calculated with the original unit
amounts, which could lead to rounding differences. These
differences in thousands of units are not changed in orderto keep the accuracy of the original data.
3 Segment information
In CHF thousands

April to September 2011
Industry

Sales
Operating profit

Automotive

113'251
18'739In CHF thousands

12'260
1'074

125'51119'813

April to September 2012
Industry

Sales
Operating profit

LEM Group
Total

Automotive

105'992
20'976

LEM | Half Year Report 2012/13

18'2032'853

10LEM Group
Total

124'195
23'829The new and revised standards do not have a material effecton the consolidated financial statements of LEM Group.
5 Other non-current assets
LEM Group increased other non-current assets by CHF
4.0 million due to the prepayment of retirement contributions to the Swiss retirement fund.
6 Financial liabilities
LEM Group increased financial short-term liabilities to CHF
5.0 million (CHF 3.0 million at 31 March 2012) via short-term
credit lines.
For the purpose of the consolidated statement of cash flow,
the bank loans are shown in the cash flow from financing
activities.
7 Provisions
The transfer of LEM Denmark’s contract manufacturing and
R&D activities to LEM Switzerland has been effective during
the first half year. The associated restructuring provision
has been used.
8 Shareholders’ equity
A t the shareholders’ meeting held in Geneva on 28 June 2012,
the shareholders approved the distribution of an ordinary
dividend of CHF 25.00 per share. The gross dividend paid on
9 July 2012 amounted to CHF 28’374 thousand (prior year:
ordinary dividend of CHF 40.00; total CHF 45’461 thousand).
In the first half year 2012/13, the 3’419 remaining treasury
shares on LEM’s own account have been sold for a total
amount of CHF 1’619 thousand.

In the frame of its market-making contract, LEM has
acquired a net of 625 shares for a total amount of CHF 343
thousand. At 30 September 2012, LEM owns 1'794 treasury
shares.
9 Change in the classifications of items in the consolidated income statement
In the frame of the continuous improvement of its processes
and systems, LEM has reviewed the definition of each lineof its consolidated income statement and reached the conclusion that some items should be reclassified in order toprovide a more relevant financial information about its operations.
These reclassifications are related to the following items:_ Prior to the reclassification, management compensation
had partially been shown in administration expenses andpartially in the lines to which the managers contributed.
After the reclassification, all management compensationis shown in the line to which the managers contribute.
_ Facility cost (rent, energy, ...) has been attributed into the

11 Changes in scope of consolidation
During the year, the activity of LEM SA has been separated
into two distinct companies. LEM Intellectual Property SA
is in charge of the intellectual property of the Group, with
its office in Fribourg; LEM Switzerland SA is responsible for
the Swiss production and contract R&D activities, with its
office in Geneva.
LEM is currently in the process of simplifying the structureof its European agencies. At 30 September 2012, this has
not generated any changes in the scope of consolidation.
12 Events after the balance sheet date
The Board of Directors and Senior Management are notaware of any significant events up to the date of approvalof the consolidated financial statements on 5 November
2012 that would require an adjustment in carrying amountsof the Group’s assets and liabilities.
13 Exchange rates
The following exchange rates were used:

lines according to the resources used by each activity.
_ Expenses of operation support teams had previously beenshown partially in administration expenses. After thereclassification, these expenses are fully shown in cost of
goods sold.
The impacts by category of changes are disclosed below:
In CHF thousands
Managementcompen sation

Sales
Cost of goods sold
Gross margin
Sales expense
Administration expense
R&D expense
Other expense
Other income
Operational EBIT

Facility
costs

Operation
supportcosts(1'174)

(825)

(550)

(3)
1'552
(375)

(226)
1'246
(195)

550

0

(0)

0

Total impact

EUR
GBP
JPY
USD
RUB
CNY
DKK

Period-end rate for

Period average rate forbalance sheet

income statement

30.09.12

31.03.12

2012/13

2011/12

1.208
1.519
0.0121
0.940
0.030
0.148
0.162

1.204
1.444
0.0109
0.902
0.031
0.142
0.162

1.202
1.500
0.0120
0.949
0.030
0.150
0.162

1.209
1.373
0.0106
0.847
0.030
0.131
0.162

0
(2'549)(2'549)
(229)
3'348
(570)
0
0
(0)

10 Income taxes
Income tax expense is calculated based on the best estimateof the applicable annual income tax rate expected for the fullyear.
The decrease in the effective tax rate of LEM Group is due tothe qualification as High- and New-Technologies Enterprisein China and to the new double taxation agreement between
Japan and Switzerland, which liberates dividend paymentsfrom LEM’s Japanese subsidiary from withholding taxes.

LEM | Half Year Report 2012/13

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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
www.lem.com

LEM | Half Year Report 2012/13

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