Results for the financial year ending March 31 2003

5/28/2003, 8:29 PM (Source: GlobeNewswire)
The Group adapts its structure to market conditions In 2002/03 the LEM Group achieved sales of CHF 150.4 mio., not including the CHF 6.5 mio. of sales in discontinued operations. In local currencies this represents a growth of 1.4%, but in Swiss francs a decrease of 3.9%. The EBIT, which includes a restructuring charge of CHF 3.1 mio., reached CHF 0.9 mio. against CHF 5.7 mio. last year. This charge, together with a one-off loss of CHF 1.5 mio. on the sale of High Current Systems, accounts for a net loss of CHF 4.9 mio. compared to net earnings of CHF 1.9 mio. last year.

Restructuring charges and divestment affecting results

The economic downturn continued throughout the financial year ending
March 31 2003. Although the situation has stabilised and orders
received have increased in some areas, the Executive Management Team
focuses since mid 2002 on restructuring the Group to restore LEM's
profitability. The resulting plan is now being implemented and the
necessary provisions have been made. The restructuring measures
resulted in a total charge of CHF 3.1 mio.. The restructuring
programme aims to cut costs through simplified organisational
structures (e.g. close-down of sales offices in Lyons and Nuremberg),
to reduce the product diversity (e.g. reduced number of variants for
components and common instruments platforms) and to lower the
manufacturing depth by outsourcing parts of the production in Geneva,
Vienna and Skelmersdale (UK).

The decision, which was announced last week, to divest the High
Current Systems resulted in one off-loss of MCHF 1.5 recorded as an
exceptional loss on discontinued operations, which does not affect
the EBIT.

Comparison of results between 2002/03 and 2001/02

Compared to our last forecasts in February we had to add another CHF
2.1 mio. of restructuring charges. Together with lower sales this
resulted in an EBIT of CHF 0.9 mio. against CHF 5.7 mio. last year.
The negative impact from exchange rates was of minus CHF 10.4 mio. on
sales and minus CHF 2.6 mio. on EBIT.
Despite this negative impact, we were able to maintain gross margin
above 47%. The decisions to close the manufacturing operations of
Digital Fault Recorders in the USA and to restructure NANALEM in
Japan had their full impact in the financial year 2002/03
contributing total savings of CHF 2 mio..

In this tough economic situation, we have reallocated and even
reinforced our R&D efforts (8.3% of sales) in order to speed up the
development of effective and innovative products for the future.

Net financial expenses were reduced to CHF 2.8 mio. from CHF 3.5
mio., mostly because of lower interest rates which also explain the
increase of net real estate earnings from CHF 0.4 mio. in 2001/02 to
CHF 0.8 mio. in 2002/03. Taxes amounted to CHF 2.1 mio. compared to
CHF 0.4 mio. in the previous year. Last year included negative
deferred taxes of CHF 0.7 mio. against a deferred tax expense of CHF
1.1 mio. for 2002/03, which has no cash impact.

Losses from discontinued operations of CHF 1.5 mio. refer to the
divestment of High Current Systems.

The net loss for 2002/03 amounts to CHF 4.9 mio. compared to net
earnings of CHF 1.9 mio. for 2001/02. On this basis the Board of
Directors proposes not to distribute a dividend for the financial
year 2002/03.

Balance sheet and Cash flow

The cash flow from operations increased by CHF 5.8 mio. to CHF 14
mio. thanks to a reduction in the working capital. The cash flow from
investments amounts to CHF 9.6 mio. (CHF 15.0 mio. last year). This
resulted in free cash flow excluding acquisitions of CHF 8.1 mio.
against CHF 1.0 in the previous year. The net debt has been reduced
by CHF 3.1 mio. to CHF 63.5 mio., of which CHF 26.1 mio. relates to
industrial activity and the rest to real estate business.

Real estate

We are presently negotiating the sale of the CTN real estate complex
with investors, who have signed a confidentiality agreement.

Business Status

LEM Components' sales grew by 1.5% in local currencies (-5% in Swiss
francs). Orders received grew by 12% over last year, coming mainly
from the industrial segment in Europe and Asia, with North American
demand remaining weak. At the end of January, we finalised the
acquisition of the assets of the Hinode transducer business in Tokyo.
Over two months this activity contributed CHF 0.6 mio. to LEM
Components' sales.

LEM Instruments' overall sales remain stable in local currencies
(-5.7% in Swiss francs). The 4th quarter sales were as high as the
seasonally affected 3rd quarter sales, a strong performance explained
by Digital Fault Recorders and Power Quality Systems orders shipped
at the end of March. Sales in the Power segment grew last year
whereas those related to traditional instrumentation declined. Orders
dropped by one percent but were 4% higher than sales, which means
that the new financial year starts with a good order book.

For LEM Ventures, organic growth in local currencies amounted to 8.2%
(0.5% in Swiss francs). As for Probes, the acquisition of Universal
Technic SAS, which is fully consolidated for nine months, contributed
CHF 1.5 mio. to the growth of LEM Ventures. In the Automotive Program
current year sales are modest as we deliver pre-series and
prototypes. The contract, which we received in 2001, has been
extended, even though the starting date has been postponed to 2004.
We have also concluded an additional contract with a first tier
supplier. Both are for battery monitoring, with the second for US
applications aimed at reducing fuel consumption to meet new legal
requirements. The cumulative sales of both contracts total CHF 90
mio. for the period 2004-2008.


Against all the market uncertainties, we feel confident that the
adaptations of our Group structures combined with new market
alliances, will allow us to restore LEM to profitability in the
current financial year 2003/04.

Please click on the link below to download the PDF including tables:
View document
Patrick De Bruyne
Phone +4122 706 1240 or +4179 200 2702

Kennerth Lundgren
Phone +4122 706 1220 or +4179 222 5518

Geneva, 28 May 2003

Appendix: table sales, orders and P&L
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