Half Year Report
2011/12At the heart of power electronics

LEM | Half Year Report 2011/12

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Business Report
Dear Shareholders,
Only one year ago we were on the peak of the recovery after the 2008/09 financial crisis. Orders werestrong and LEM was challenged to ramp up its capacity in order to meet market demand. Meanwhile,the economic environment has changed. The sovereign debt crisis generates uncertainty about the
global economy and consequently about the short-term development of our markets. In addition,
the appreciation of the Swiss franc has affected our sales and profitability. We have had a ­c hallenging
first half of 2011/12, but we nevertheless achieved an operating EBIT margin above 15%.
At CHF 125.5 million, our sales have decreased 11.5% from the first half of 2010/11. At constantexchange rates, sales grew by 2.9%. Reported bookings for the first half of 2011/12 declined by
56.4% to CHF 80.4 million. The Q2 2011/12 reported book-to-bill ratio was at 0.53. The decline inbookings was a result of the weak renewable energies markets and the fact that many customers
reduced their inventories after having placed major bookings in previous quarters. Reported b­ ookings
also contain cancellations of CHF 24.5 million in the solar business; excluding this one-off adjustment bookings were CHF 104.9 million.
The gross margin decreased by 1.2 percentage points to 42.5% compared to 43.7% in the first halfof the last year. The operational EBIT for the first half year was CHF 19.2 million, a decrease of 36.7%
year on year. The operational EBIT margin (15.3%) was affected by lower volumes and by currency
developments, but remained within our target range (15–20%). In the first half of 2010/11, the EBIT
margin was exceptionally high at 21.4%.
Net profit for the first half of 2011/12 amounted to CHF 15.0 million, a decrease of 24.1% comparedto the first half of 2010/11.
Industry segment affected by weakening economy
Sales in the Industry segment reached CHF 113.3 million in the first half of 2011/12, a decrease of
13.4% year on year. The operational EBIT for the first six months decreased by 36.4% to CHF 18.2
million. Europe remains the most important market followed by Asia, with 52% and 34% of sales
respectively. Sales decline in all regional markets, with Europe –16%, Asia –13% and North America –5%.
The drives & welding business has weakened during the summer across all regions reflecting uncertainties about the development of the global economy. The renewable energies & power supplies
business slowed down beginning in Q4 2010/11. This trend was mainly visible in Italy, Germany andChina, a consequence of reduced subsidies in the renewable energy sector and the continued reductionof our customers’ inventories. The traction business, which is driven by a combination of economic
cycles and government spending, proved to be stable for LEM. Traction business in Asia continued
to grow despite some projects in China that were stopped for technical reasons. The technologydriven high precision business was relatively stable.
Automotive segment: solid volume growth
The Automotive segment achieved solid volume growth both in the conventional cars and in the green
cars businesses. Sales grew by 11.9% to CHF 12.3 million. At last year’s exchange rates, growth was
38.2%. We achieved this result with new applications with existing customers as well as with newcustomers. We have continued to diversify our client base, an asset that will stabilize our performancegoing forward. The operational EBIT was CHF 1.0 million. The year-on-year decrease of 41% is a
result of the exchange rate impact and increased R&D efforts. In the conventional cars business LEM
increased its market share in Asia and North America. In the green cars business (hybrid electricaland electrical vehicles), the positive trend of the past quarters continued. Today, LEM products aredesigned into the majority of all green car projects launched globally. LEM’s volume increase will
depend on car manufacturers’ success with these new platforms.

LEM | Half Year Report 2011/12

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Continued investment in technology leadership
We continued to invest in order to develop our leadership position. In the first half of 2011/12, weinvested CHF 7.0 million, or 5.5% of sales, in R&D. This represents a CHF 0.8 million increase compared with the first half of 2010/11. Our priorities were to strengthen our innovation team and tolaunch new products that provide better accuracy, faster response time and new features. In traction, we introduced new current (ITC family) and voltage (DV) transducers with unprecedented levelsof ­a ccuracy that can also be used for energy billing.
Adjusting cost base to sales level
Following the continued slowdown of orders and the appreciation of the Swiss franc, we stepped up
the cost reduction measures we had initiated as soon as the first signs of the market weakening
became apparent at the end of the last financial year. With these measures, we aim to adjust our costbase to the current sales level. The measures include a worldwide reduction in employee numbers.
Global headcount is being reduced from about 1’300 per 30 June 2011 to below 1’100. Permanent
headcount in Switzerland is being reduced by 19.
Restructuring cost incurred or provisioned in the first half of 2011/12 amounted to CHF 0.7 million;
we expect capacity adjustment measures to result in quarterly savings of CHF 1.1 million, fully applicable for Q4 2011/12.
OutlookIn the second half of 2011/12, we expect orders in the Industry segment to stabilize on a low leveland sales to further decrease compared to the first half of 2011/12. The Automotive segment willfurther benefit from the current growth momentum. With the cost adjustment implemented, we havealigned our cost base to the current sales levels. For the financial year 2011/12, we are cautious
regarding our markets and forecast sales of CHF 200 to 230 million, compared to the previous year’s
sales of CHF 296.2 million.
While remaining ready to adapt to the increasingly volatile nature of our business, we remain c­ onfident
for the long-term perspective of LEM and keep developing our strengths in order to be able to profit
from a recovering economy. The economic growth drivers and trends supporting our business in thepast remain fully valid.
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
CEO

LEM | Half Year Report 2011/12

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Financial Results
April to September
In CHF thousands

2011/122010/11

Sales
Cost of goods sold
Gross margin

125'511(72'187)
53'324

141'780(79'787)
61'993

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

(11'909)(15'301)(6'959)(145)
183
19'194(10'991)(14'467)(6'144)(306)
242
30'327

619

(429)

EBIT

19'81329'899Financial expense
Financial income
Foreign exchange effect

(172)
46
(1'035)(331)
87(2'406)

Profit before taxes

18'65127'249

Income taxes(3'624)(7'439)Net profit of the period

15'02819'810Additional SOP costs/income

LEM | Half Year Report 2011/12

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Interim
Consolidated
Financial
Statements

LEM | Half Year Report 2011/12

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Consolidated Statement of
Financial Position
AssetsIn CHF thousands

30.09.11

31.03.11

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

10'61546'79439'087150
3'000
99'646

27'23160'02634'187
1'310
1'717
124'471

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

1'970
27'183
7'474
2'182
38'8091'919
25'6127'796
2'181
37'508

Total assets

138'455

161'979

In CHF thousands

30.09.11

31.03.11

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

21'271
14'611
5'601
2'749
21'004
1'089
66'32629'617
16'295
7'560
1'556
618
2'821
58'467

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

1'022
5'013
100
6'135

969
5'541
89
6'599

Total liabilities

72'46165'066EquityShare capital
Treasury shares and derivative instruments on treasury shares
Reserves
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity570(2'107)
16'63350'89865'9940
65'994575(7'091)
17'91485'51596'9130
96'913

Total liabilities and equity

138'455

161'979

Liabilities and equity

LEM | Half Year Report 2011/12

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Consolidated Income Statement
April to September
In CHF thousands

2011/122010/11

Sales
Cost of goods sold
Gross margin

125'511(72'187)
53'324

141'780(79'787)
61'993

Sales expense
Administration expense
Research & development expense
Other expense
Other income
Operating profit(11'845)(14'788)(6'916)(145)
183
19'813(11'035)(14'822)(6'173)(306)
242
29'899Financial expense
Financial income
Foreign exchange effect

(172)
46
(1'035)(331)
87(2'406)

Profit before taxes

18'65127'249

Income taxes(3'624)(7'439)Net profit for the period

15'02819'810Attributable to:
LEM shareholders
Non-controlling interests
Net profit for the period

15'0280
15'02819'75951
19'810Earnings per share, in CHF
Basic earnings per share
Diluted earnings per share

13.25
13.25

17.31
17.26

LEM | Half Year Report 2011/12

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Consolidated Cash Flow Statement
April to September
In CHF thousands

2011/122010/11

Cash flow from operating activities
Net profit of the period
Adjustment for non-cash items
Cash flow from changes in net working capital
Cash flow from operating activities

15'028
3'454(4'112)
14'37019'810
5'676(15'044)
10'442

Cash flow from investing activities
Investment in fixed assets
Disposal of fixed assets and intangible assets
Investment in intangible assets
Increase (–) / decrease (+) in other assets
Cash flow from investing activities(5'309)259(189)
0(5'239)(2'893)104(89)
7(2'871)

Cash flow from financing activities
Acquisition of non-controlling interests
Treasury shares acquired (–) / divested (+)
Dividends paid to the shareholders of LEM Holding SA
Dividends paid to non-controlling interests
Increase (+) in financial liabilities
Cash flow from financing activities

0(665)(45'461)0
21'005(25'121)(197)(2'458)(22'895)(50)
8'010(17'590)

Change in cash and cash equivalents(15'990)(10'019)

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

26'613(12)
10'61129'757(351)
19'387

LEM | Half Year Report 2011/12

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Consolidated Statement ofComprehensive Income
April to September
In CHF thousands

2011/122010/11

Net profit for the period recognized in the income statement

15'02819'810275(2'579)29

15'30315'303

17'25917'20851

Currency translation difference
Unrealized gain on derivatives designated as cash flow hedges
Total comprehensive income for the period
Attributable to shareholders
Attributable to non-controlling interests

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

Non-­controllinginterests

Share­c apital

TreasurysharesShare
plan

Fair value
reserve

Translation
reserve

1 April 2010
Total comprehensive income
Dividends paid
Dividends paid to non-controlling interests
Changes in non-controllinginterests
Performance share plan
Purchase and sales of treasury
shares30 September 2010

575

(3'387)

925

7
29

1'482
(2'579)575(5'225)

1'011

36(1'097)80'445075'744

1 April 2011
Total comprehensive income
Changes in capital
Dividends paid
Performance share plan
Purchase and sales of treasury
shares30 September 2011

575

(7'091)

1'556

0
0

(2'676)
275

0
0

(5)

3’968

104'549
15'028(3'963)(45'461)(216)(5)

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

0

(2'401)

69'932065'994

In CHF thousands

83'56319'759(22'895)

18

214
51
(50)

83'37917'259(22'895)
(50)

(215)

(197)

86

86
(1'838)(1'838)

570

1’681
(665)

(1'556)(2'107)0

Total equity

LEM | Half Year Report 2011/12

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Notes to the Interim Consolidated
Financial Statements– – Amendment to IFRIC 14 – Prepayments of a Minimum

1 Segment information
In CHF thousands

April to September 2010
Industry

Sales
EBIT

Automotive

130'819
28'226

10'961
1'673

In CHF thousands

141'780
29'899April to September 2011
Industry

Sales
EBIT

LEM Group
Total

Automotive

113'251
18'73912'260
1'074

LEM Group
Total

125'51119'8132 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 – areused in a broad range of applications in drives & welding,renewable energies & power supplies, traction, high precision, conventional and green cars businesses.
3 Basic principles of group accounting
These unaudited consolidated financial statements for thesix months ended on 30 September 2011, 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 that ended 31 March 2011.
The accounting and valuation policies are consistent withthose applied in preparing the annual consolidated financial
statements for the year 2010/11, 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 o­ riginal
estimates and assumptions will be modified as appropriate
in the period in which the circumstances change.
4 Adjustments to new IAS/IFRS standards and­i nterpretations
The following new and revised standards and interpretations
became effective for the reporting year 2011/12:– – Improvements to IFRSs sets out amendments across 7
different standards, related basis for conclusions andguidance.
– – IAS 24 Related Party Disclosures (revised): removes therequirement for government-related entities to disclosedetails of all transactions with the government and othergovernment-related entities, it also clarifies and simplifies
the definition of a related party.

LEM | Half Year Report 2011/12

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Funding Requirement: removes an unintended consequence of IFRIC 14 where entities are in some circumstances not permitted to recognize as an asset prepayments of minimum funding contribution.
– – IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments: clarifies the accounting when an entity renegotiates the terms of its debt with the result that the ­l iability
is extinguished by the debtor issuing its own equity instruments to the creditor.
– – IFRS 1 Severe hyperinflation and removal of fixed dates
for first-time adopters– – IFRS 7 Transfers of financial assets
The other new and revised standards do not have a material
effect on the consolidated financial statements of LEM
Group.
5 Income taxes
Income tax expense is calculated based on the best ­e stimateof the applicable annual income tax rate expected for thefull year.
The decrease in the effective tax rate of LEM Group is dueto the changes of the profitability of the Group’s subsidiaries
in the various jurisdictions, withholding taxes on dividends
distributed out of prior years profits within the Group andto a withholding tax refund of CHF 0.6 million.
6 Financial liabilities
LEM Group increased financial short-term liabilities to
CHF 21.0 million (CHF nil at 31 March 2011) via short-term
credit lines.
7 Provisions
On 22 September 2011, LEM announced a restructuringplan. At 30 September 2011, the provision booked in relation
with this plan amounts to CHF 0.5 million.
8 Shareholders’ equity
At the shareholders’ meeting held in Geneva on 1 July 2011,
the shareholders approved the distribution of an ordinary
dividend of CHF 40.00 per share. The gross dividend paidon 11 July 2011 amounted to CHF 45.46 million (prior year:
ordinary dividend of CHF 5.00 plus extraordinary dividendof CHF 15.00 per share; total CHF 22.90 million).
On 4 July 2011, LEM Holding reduced its capital of 10’000
shares of CHF 0.5 each by the cancellation of the 10’000
own shares previously acquired for a total amount of CHF
3.97 million.
In the first quarter 2011/12, the Performance Share Plan
was settled. The agreements for Chinese and Japaneseemployees were amended and settled in cash. The cash
settlement concerned 1’136 shares for which a total amountof CHF 0.65 million was paid. The remaining 4’828 shareswere transferred to employees generating a net impact inthe equity of CHF 0.22 million.
In the first half year 2011/12, LEM acquired 1’722 own
shares for a total amount of CHF 0.67 million.

9 Changes in scope of consolidation
In the previous year, the following change in the scope of
consolidation occurred:
TVELEM acquired its own shares representing the outstanding
10% of ownership. After this operation, the percentage ofinterest in TVELEM reached 100%.
10 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 2 November
2011 that would require an adjustment in carrying amountsof the Group’s assets and liabilities.
11 Exchange rates
The following exchange rates were used:

EUR
GBP
JPY
USD
RUB
CNY
DKK

Period-end rate for

Period average rate forbalance sheet

income statement

30.09.2011

31.03.2011

2011/122010/11

1.218
1.406
0.0117
0.901
0.028
0.141
0.164

1.299
1.474
0.0111
0.917
0.032
0.140
0.174

1.209
1.373
0.0106
0.847
0.030
0.131
0.162

1.372
1.627
0.0120
1.071
0.035
0.158
0.184

LEM | Half Year Report 2011/12

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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 2011/12

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