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Zumtobel Group AG

Quarterly Report Dec 9, 2008

770_ir_2008-12-09_183fb05e-ab70-4df7-8495-3faa52e27c01.pdf

Quarterly Report

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Interim Financial Report Zumtobel AG 1 May to 31 October 2008

zumtobel group

Overview of the First Half-Year

Revenues reach prior year level after adjustment for foreign exchange effects

Foreign currency effects reduce revenues by more than EUR 23 million

  • Adjusted EBIT margin equals 9.4%

  • Positive development of working capital continues

Revenues from the sale of LED-based products grow by more than 30%

First negative effects from economic weakness noted in 2nd quarter

Key Data in EUR million Q2
2008/09
Q2
2007/08
Change
in %
1st Half
Year
2008/09
1st Half
Year
2007/08
Change
in %
Full Prior
Year
2007/08
Revenues 324.5 343.0 (5.4) 641.1 666.1 (3.7) 1,282.3
Adjusted EBITDA 43.0 51.9 (17.3) 81.2 95.3 (14.7) 162.2
as a % of revenues 13.2 15.1 12.7 14.3 12.7
Adjusted EBIT 32.0 42.5 (24.5) 60.1 75.7 (20.7) 123.0
as a % of revenues 9.9 12.4 9.4 11.4 9.6
Net profit for the period 27.9 29.9 (6.9) 42.1 55.1 (23.5) 93.5
as a % of revenues 8.6 8.7 (1.5) 6.6 8.3 (20.5) 7.3
Total assets 1,133.6 1,160.8 (2.3) 1,105.9
Equity 497.9 475.5 4.7 514.2
Equity ratio in % 43.9 41.0 46.5
Net debt 178.4 183.3 (2.6) 129.0
Cash flow from operating results 79.2 95.2 (16.9) 166.0
ROCE in % 16.2 18.7 18.9
Investments 15.8 12.3 28.3 30.3 22.5 34.8 66.0
as a % of revenues 4.9 3.6 4.7 3.4 5.1
Headcount (full-time equivalent) 7,727 7,354 5.1 7,708

The seasonal development of business

Adjusted EBIT

Letter to Shareholders

Dear Shareholders,

The consequences of the financial market crisis have led to the collapse of economic growth across the globe and created an atmosphere of unusually high uncertainty on the markets in which the Zumtobel Group is active. Against the backdrop of this significant economic weakness, the Zumtobel Group recorded comparatively stable operating development for the first half of the 2008/09 financial year. Group revenues nearly matched the high comparative prior year level, after adjustment for foreign exchange effects of more than EUR 23 million. The Components Segment (TridonicAtco) registered an increase of 3% in revenues after foreign exchange effects, while the Lighting Segment (Zumtobel and Thorn brands) remained slightly below the prior year. In the LED business, we were able to increase revenues by more than 30% during the first half-year as planned.

In the European core markets of the D/A/CH region, the slowdown in growth became increasingly noticeable during the second quarter (-2.0%) but cumulative revenues for the first six months reached the comparable 2007/08 level. The development of business in Western Europe was increasingly influenced by the unfavourable market environment and negative foreign exchange effects from the weak British Pound, while further growth was generated in Eastern Europe. In Asia the Group continued the steady implementation of its optimisation programme – revenues in this region rose by more than 5% for the reporting period (1 May 2008 to 31 October 2008). Australia again remained below expectations and was also affected by the strong devaluation of the Australian dollar. As previously announced, the return on sales for the second quarter was unable to match the high 12.4%, recorded in the previous year, but the EBIT margin of 9.9% can be considered satisfactory under the current difficult market conditions. The decrease in earnings resulted primarily from a lower contribution due to the decline in revenues, higher personnel expenses that followed changes in collective bargaining agreements, higher costs for the development and expansion of LED activities and negative foreign currency transaction effects from the British Pound. Adjusted earnings before interest and taxes (EBIT) equalled EUR 32.0 million for the second quarter, compared with EUR 42.5 million in the second quarter of 2007/08. Financial results improved significantly due to valuation effects and, as a result, profit before tax and profit after tax totalled EUR 33.4 million, respectively EUR 27.9 million for the second quarter or only slightly less than the comparable prior year values.

Extensive efficiency programme started

We expect a further deterioration in the economic climate during the 2009 calendar year. In order to substantially increase our flexibility to react to the noticeable decline in market demand, the Zumtobel Group has launched an efficiency improvement programme. These measures should lead to a sustainable reduction of roughly EUR 50 million in personnel and operating costs by the end of the 2010/11 financial year. Our primary objective is to adjust organisational and capacity costs as quickly as possible to reflect the current and expected developments in our markets and sales volumes, and also hold cash flow at a sound level under these difficult operating conditions. Based on the current negative economic trends and the fact that the major part of these cost savings will only provide relief for earnings beginning in 2009/10, our goal to record an EBIT margin of 8 to 9% for 2008/09 no longer appears realistic. However, we are convinced that our efficiency improvement programme and solid capital structure will allow the Zumtobel Group to emerge stronger from this difficult market situation.

Andreas J. Ludwig Thomas Spitzenpfeil Chief Executive Officer Chief Financial Officer

Andreas Ludwig

Thomas Spitzenpfeil

The Zumtobel Share

The extremely weak climate on global stock exchanges also had a negative influence on the development of the Zumtobel share from 1 August 2008 to 31 October 2008. Growing fears of a worldwide recession triggered a drop of 44% in the leading Austrian ATX index, which also includes Zumtobel, during this same period. The Zumtobel share lost 15.7% of its value in the second quarter, closing the first half of 2008/09 at a price of EUR 9.65. Over the last 12-month period (31 October 2007 to 31 October 2008) the ATX has fallen by 59%. At the end of the reporting period the Zumtobel share traded 67.3% lower than on 31 October 2007.

In addition to the generally unfavourable climate on capital markets, the expected weakness in the construction industry and related sectors had an added negative effect on the share performance. Moreover, smaller and mid-sized corporations generally come under particularly strong pressure in bear markets. The highest closing price registered by the Zumtobel share for the reporting period was EUR 12.00 on 2 August 2008 and the lowest closing price was EUR 8.22 on 8 October 2008. The market capitalisation of the Zumtobel Group fell to EUR 431 million at the end of October, based on an unchanged number of shares (44.7 million). Free float declined from 66% to 63% at the end of the reporting period as a result of the share buyback programme, and the Zumtobel family continues to hold a stake of 34%.

Development of the Zumtobel Share

Key Data on the Zumtobel Share for the 1st Half-Year
-- -- -- -- -- -- -- -- -- -- ------------------------------------------------------ --
Closing price at 30.04.08 € 19.64 Currency EUR
Closing price at 31.10.08 € 9.65 ISIN AT0000837307
Performance Q2 2008/09 (50.9)% Ticker symbol Vienna Stock Exchange (XETRA) ZAG
Performance 1st half year (52.9)% Market segment Prime Market
Ø Market capitalisation at 31.10.08 € 431 Mio Reuters symbol ZUMV.VI
Share price - high at 02.05.08 € 20.49 Bloomberg symbol ZAG AV
Ø Turnover per day (shares) 165,549 Datastream O:ZAG
Free float 63% Number of issued shares 44,704,344

Group Management Report

The Economic Environment

Global recession in 2009 now certain

In November the International Monetary Fund (IMF) again reduced its forecasts for 2008 and 2009, indicating that it will no longer be possible to avoid a global recession in the coming year. The consequences of the financial market crisis have led to the collapse of economic growth across the globe, and subsequently created an atmosphere of unusually high uncertainty on all markets in which the Zumtobel Group is active. The developed economies (USA, Eurozone, Japan, UK and Canada) are expected to fall into a synchronised recession and for the first time since 1945 the cumulative gross national product is forecasted to decline by 0.3% in 2009 The IMF is still forecasting global growth of 3.7% for 2008 in its November forecast, but macroeconomic conditions have deteriorated significantly in recent months. All key economic nations are showing considerable negative development towards the end of this year. The Eurozone will only realise growth of 1.2% for 2008 because of the weakness that has taken hold in major countries, and must also contend with a GNP decline of 0.5% in the coming year. For the D/A/CH countries (Germany, Austria and Switzerland), the Organisation for Economic Cooperation and Development (OECD) has forecasted a GNP increase of 1.6% in 2008. However, the expected 0.8% economic decline in Germany during 2009 is likely to trigger a recession throughout the entire D/A/CH region. The US economy will at best stagnate during the coming months and, according to the IMF, is facing a further GNP decline of 0.7% for 2009.

The global economic crisis has also started to affect the previously strong development of the emerging countries, but forecasts still call for clear above-average combined growth rates of 6.6% and 5.1% in this and the next calendar year. According to the IMF, the Chinese economy should record a plus of 9.7% in 2008 and 8.5% in 2009, while India should grow by 7.8% in 2008 and 6.3% in 2009. The comparable values for Eastern Europe are plus 4.2% and 2.5%.

Economic growth outlook 2009

The continuing economic crisis and identifiable signs of slowing growth in commercial construction across all major markets lead us to expect a noticeable decline in the demand for our lighting solutions, luminaires, light management systems and lighting components.

Significant events since 30 April 2008

As of 5 May 2008 the acquisition of SpaceCannon, which was announced in April 2008, was consolidated in the Group financial statements. SpaceCannon is specialised above all in LED-based lighting solutions for exterior, facade and event lighting and is integrated in the organisation of the Zumtobel LED Division. Acquisition in new areas of application

New credit arrangement secures long-term financing

Share buyback programme in final phase

On 12 June 2008 a five-year credit arrangement was concluded with a consortium of seven banks. This credit has a total volume of EUR 480 million, whereby EUR 186 million were used to refinance existing

liabilities. The remaining line of credit equals EUR 294 million and is available above all to finance growth and

Zumtobel AG is currently carrying out a share buyback programme, which covers the repurchase of up to 1,943,555 of the company's shares at a maximum price of EUR 20.50 per share on or before 11 February 2009. This programme was started on 11 August 2008, and 1,253,238 shares had been repurchased for an average price of EUR 9.88 per share as of 31 October 2008.

There are no other significant events to be reported.

Related Party Transactions

potential acquisitions.

Closely related persons include the Management Board and Supervisory Board of Zumtobel AG. As of the closing date for the interim financial statements on 31 October 2008, there were no business transactions with closely related persons.

The Group has concluded supply and delivery agreements with associated companies and joint ventures, which reflect third party conditions.

Revenues

  • Revenues at prior year level (-0.2%) after adjustment for foreign exchange effects

  • Growth of over 30% in revenues from LED-based products

  • Increase of 14% in revenues from Eastern Europe

  • Situation in Australia remains unsatisfactory

Revenues at prior year level after FX effects

Group revenues for the first six months of the 2008/09 financial year (1 May to 31 October 2008) declined by 3.7% to EUR 641.1 million (prior year: EUR 666.1 million). This development was the result of currency translation effects, which had a negative impact of EUR 23.4 million or 3.5%. After an adjustment for these effects, revenues matched the prior year level with a slight minus of 0.2%.

These currency translation effects are related to the strong rise in the value of the Euro, in particular with respect to the British Pound (GBP) and the Australian Dollar (AUD): The increase in the value of the Euro over the comparable prior year period was responsible for a reduction of 13.9% or EUR 18.4 million in revenues denominated in the British Pound and 6.6% or EUR 3.2 million in revenues denominated in the Australian Dollar, based on the respective average six-month exchange rates. Additional negative effects resulted from a decline in the value of revenues recorded in the US Dollar (USD) and New Zealand Dollar (NZD) as well as a number of Asian currencies. These factors were only offset to a limited extent by positive contributions from the Swiss Franc (CHF) and several East European currencies. The combined total of all currency translation adjustments was a negative effect of EUR 23.4 million.

Development of revenues (in E UR million)

The development of business in the Lighting Segment was negatively influenced by increasing market weakness as well as an above-average EUR 16.9 million of currency translation effects. Revenues for the first half-year fell 3.8% to EUR 473.9 million (prior year: EUR 492.7 million). An adjustment for foreign exchange factors results in a slight minus of 0.4%. The further weakening of the economy during the second quarter was reflected in a decline of 6.8% in revenues.

The Components Segments recognised negative foreign exchange adjustments of EUR 6.5 million for the first half-year, but was still able to match the high comparative prior year revenues (EUR 209.0 million) in this difficult operating environment. After an adjustment for currency translation effects, revenues rose by 3.0%. In the second quarter revenues increased 2.2% to EUR 106.2 million (prior year: EUR 104.0 million) and by more than 5% after an adjustment for foreign exchange effects. This steady growth has been supported above all by the continuing substitution trend in the ballast sector: as a result, the strong rise in sales volumes of technologically more sophisticated and higher priced electronic ballasts was more than able to offset the drop in sales volumes of magnetic ballasts. In contrast to the previous financial year, there have been no notable effects from changes in the price of copper to date in 2008/09.

Segment development in EUR
million
Q2
2008/09
Q2
2007/08
Change
in %
1st Half
Year
2008/09
1st Half
Year
2007/08
Change
in %
FX adjusted
in %
Lighting Segment 239.3 256.7 (6.8) 473.9 492.7 (3.8) (0.4)
Components Segment 106.2 104.0 2.2 208.8 209.0 (0.1) 3.0
Other & Consolidation (21.0) (17.7) (19.0) (41.6) (35.6) (17.0) -
Zumtobel Group 324.5 343.0 (5.4) 641.1 666.1 (3.7) (0.2)

The Zumtobel Group successfully continued to develop its business in the area of LED-based products and solutions during the first half-year. The cooperation with CREE, which was started during spring 2008, was extended in October 2008. Both companies have agreed that the Zumtobel Group will launch an advanced technological Cree Downlight in mid-November 2008, which will be marketed exclusively in Europe through the Zumtobel and Thorn brands. Revenues from the sale of LED-based products and solutions rose by 31.2% to EUR 22.9 million (prior year: EUR 17.4 million).

Lighting Segment affected by difficult market environment

Steady growth in Components Segment

Growth of over 30% in revenues from LED-based products

Distribution of regional revenues Q2 2008/09 1st Half-Year 2008/09
Change in % Change in % Revenues in
EUR million
in % of Group
D/A/CH (2.0) 0.3 162.9 25.4
Eastern Europe 2.0 13.6 40.5 6.3
Northern Europe (3.2) 0.9 52.6 8.2
Western Europe (6.9) (8.0) 205.7 32.1
Southern Europe (17.5) (12.3) 59.9 9.3
Europe (5.5) (3.8) 521.5 81.3
Asia 4.9 5.2 45.2 7.0
Australia & New Zealand (11.3) (7.4) 53.0 8.3
America (4.2) (10.6) 16.4 2.6
Others (19.6) (8.1) 5.0 0.8
Total (5.4) (3.7) 641.1 100.0

FX effects lead to slight decline in Europe

The Zumtobel Group generated revenues of EUR 521.5 million in Europe, or 81.3% of Group revenues. The 3.8% decline in relation to the first half of 2007/08 was caused primarily by negative currently translation effects of EUR 16.6 million (or minus 3.1% of revenues). After an adjustment for these effects, the Zumtobel Group recorded a decline of 0.7% in revenues from this region.

Six-month revenues in the D/A/CH region (Germany, Austria and Switzerland) reflected the prior year level, but increasing weakness was also noted in these countries during the second quarter (-2.0%). The growth market of Eastern Europe continued to profit from a satisfactory pace of activity in the construction industry and reported sound development for the reporting period. Revenues rose by 13.6% to EUR 40.5 million. All markets in Northern Europe, with the exception of Norway, showed slight recessionary tendencies during the second quarter. As expected, six-month revenues in Western Europe were strongly affected by a weak market in France and the above-mentioned decline in the value of the British Pound (GBP). The development of revenues in Great Britain would have been positive without these negative currency translation adjustments. In Southern Europe the Components Segment was affected by rising economic weakness in Italy and Spain, while the Lighting Segment increased its market shares in Italy and remained on its growth course. In total revenues in Southern Europe declined 12.3%. Increase of 14% in revenues from Eastern Europe

Situation in Australia still unsatisfactory

The optimisation programmes in Asia continued during the reporting period. Revenues in this region rose by 5.2% during the first half of 2008/09. Above all the Components Segment profited from strong market growth in China and the Far East. In the America region the US Dollar (USD) fell 7.8% in value during the first six months (1st Quarter: minus 13.3%) and was therefore responsible for almost the entire decline in revenues. However, October 2008 brought a reversal of this trend and the US Dollar gained 3% year-onyear versus the Euro. This foreign exchange constellation will reduce the negative translation effects from the US Dollar beginning in the third quarter. In Australia/New Zealand the situation remains unsatisfactory. Revenues declined by 7.4% for the reporting period, but reached the comparable prior year level after an adjustment for the devaluation of the AUD and NZD. The Australian Dollar lost 23% of its value in relation to the Euro towards the end of the second quarter. This trend will have a significant negative influence on the development of Euro revenues in Australia for the foreseeable future, and also represents an additional challenge for restructuring efforts in Australia.

Earnings

  • Adjusted EBIT margin equals 9.4%

  • Gross profit margin remains stable at 38.4%

  • Currency transaction effects from strong Euro reduce EBIT

  • Improvement in financial results

Income statement in EUR million Q2
2008/09
Q2
2007/08
Change
in %
1st Half
Year
2008/09
1st Half
Year
2007/08
Change
in %
Revenues 324.5 343.0 (5.4) 641.1 666.1 (3.7)
Cost of goods sold (199.5) (208.8) 4.4 (394.9) (409.3) 3.5
Gross profit 124.9 134.3 (7.0) 246.2 256.8 (4.2)
as a % of revenues 38.5 39.1 38.4 38.6
SG&A expenses adjusted for special
effects
(92.9) (91.8) (1.1) (186.1) (181.1) (2.8)
Adjusted EBIT 32.0 42.5 (24.5) 60.1 75.7 (20.7)
as a % of revenues 9.9 12.4 9.4 11.4
Special effects (1.6) (0.5) <(100) (2.7) (1.1) <(100)
EBIT 30.4 42.0 (27.6) 57.4 74.7 (23.1)
Financial results 3.0 (7.6) >100 (7.0) (12.3) 43.1
Profit before tax 33.4 34.4 (2.9) 50.4 62.4 (19.2)
Income taxes (4.3) (4.3) 1.3 (7.3) (7.2) (1.9)
Net profit for the period from
discontinued operations
(1.3) (0.2) <(100) (1.0) (0.2) <(100)
Net profit for the period 27.9 29.9 (6.9) 42.1 55.1 (23.5)
Depreciation and amortisation 10.9 9.5 15.3 21.2 19.5 8.3
Earnings per share (in EUR) 0.63 0.67 (6.0) 0.95 1.23 (22.8)

Note: EBITDA (EBIT plus depreciation and amortisation) equalled EUR 78,6 million.

EBIT adjusted for special effects fell by EUR 15.6 million to EUR 60.1 million (prior year: EUR 75.7 million). This represents a decrease of 200 basis points from the comparable prior year level to a return on sales of 9.4% for the reporting period.

Adjusted EBIT margin equals 9.4%

Development of adjusted E BIT (in E UR million)

The gross profit margin declined 20 basis points to 38.4% of revenues for the reporting period. Gross profit was negatively affected by a lower contribution due to the decline in revenues, substantial negative foreign exchange effects from the strong Euro and higher expenditures for research and development. The year-onyear increase in the Euro versus the British Pound (GBP) led to an additional negative currency transaction effect of roughly EUR 6 million from exports to Great Britain. The implementation of efficiency and cost reduction programmes were responsible for a reduction in personnel expenses from 14.7% to 14.5% of revenues and from 42.3% to 42.2% in the cost of materials (respectively 41.3%, adjusted for GBP currency transaction effects). An analysis of adjusted EBIT in the first half of 2007/08 versus the reporting period ("EBIT bridge") shows gross savings of EUR 8.3 million. In contrast, the other components of the cost of goods sold rose by EUR 3.3 million. This increase was related above all to a 17.3% rise in development costs to EUR 16.7 million (prior year: EUR 14.2 million), whereby the major part (EUR 1.3 million) was related to the expansion of LED activities. After an adjustment for special effects, selling, administrative and other expenses (SG&A) rose by 2.8% over the comparable prior year level to EUR 186.2 million for the first six months of 2008/09 (prior year: EUR 181.1 million). In addition to a general increase in costs, this development was driven above all by an increase in wages and salaries in accordance with collective bargaining agreements (approx. 4%) and additional costs for the setup of the LED division. Special effects of EUR 2.7 million were recognised as additional costs during the first six months of 2008/09. They consist primarily of EUR 2 million in restructuring costs for redundancy payments and other expenses related to the construction of the new plant in Spennymoor as well as EUR 0.5 million for the efficiency improvement programme that has been started in the Lighting Segment in Australia. The following table shows the Group's operating performance after an adjustment for the above-mentioned special effects. Gross profit margin remains stable 2.8% increase in SG&A expenses Special effects in operating profit

Adjusted EBIT in EUR million Q2
2008/09
Q2
2007/08
Change
in %
1st Half
Year
2008/09
1st Half
Year
2007/08
Change
in %
Reported EBIT 30.4 42.0 (27.6) 57.4 74.7 (23.1)
thereof special effects (1.6) (0.5) <(100) (2.7) (1.1) <(100)
Adjusted EBIT 32.0 42.5 (24.5) 60.1 75.7 (20.7)
as a % of revenues 9.9 12.4 9.4 11.4

Financial results improved by EUR 5.4 million year-on-year to minus EUR 7.0 million for the reporting period. Interest expense of EUR 14.3 million includes non-recurring expenses of roughly EUR 4.4 million in connection with the premature refinancing of the loan contracted in 2001 to fund the Thorn acquisition as well as the interest component (EUR 0.9 million) of the lease for the new plant in England. The remaining interest expense totalled EUR 9.0 million for the first half-year (prior year: EUR 10.7 million) and is comprised chiefly of interest expense for the current credit agreement. Other financial income and expenses totalled plus EUR 4.8 million, and are related above all to positive effects of EUR 6.8 million (prior year: minus EUR 3 million) from derivatives – in particular USD and GBP forward exchange contracts.

Financial result in EUR million Q2
2008/09
Q2
2007/08
Change
in %
1st Half
Year
2008/09
1st Half
Year
2007/08
Change
in %
Interest expense (5.4) (5.7) 5.0 (14.3) (11.3) (26.7)
Interest income 0.4 1.1 (62.0) 1.5 1.9 (21.4)
Net financing costs (5.0) (4.6) (8.3) (12.8) (9.4) (36.4)
Other financial income and expenses 7.4 (3.9) >100 4.8 (4.8) >100
Profit/(loss) from associated companies 0.6 0.9 (37.8) 1.0 2.0 (46.9)
Financial results 3.0 (7.6) >100 (7.0) (12.3) 43.1

Profit before tax fell by EUR 12.0 million (-19.2%) to EUR 50.4 million for the first half of 2008/09, and income tax equalled EUR 7.3 million (prior year: EUR 7.2 million). Net profit for the reporting period amounted to EUR 42.1 million, which represents a decline of 23.5%. The negative results from discontinued operations resulted from an impairment charge of EUR 1.3 million on a performance-based receivable from the sale of the airfield business, which was recognised during the second quarter. Earnings per share for the shareholders of Zumtobel AG (basic EPS on 44.2 million shares) totalled von EUR 0.95 (prior year: EUR 1.23).

Cash Flow and Asset Position

The positive development of working capital continued during the reporting period. Cash outflows of EUR 10.9 million were significantly lower than in the first half of 2007/08 (EUR 42.1 million), chiefly due to a reduction in receivables. Working capital totalled EUR 244.1 million as of 31 October 2008 (prior year: EUR 289.9 million). As a percentage of rolling 12-month revenues, working capital declined year-on-year for the fifth quarter in succession to 19.4% for the reporting period (prior year: 22.7%).

Positive development

of working capital continues

Improvement in financial results

19.2% decline in profit before tax

Working Capital as a % of rolling 12-month revenues

Cash outflows for investments totalled EUR 30.3 million for the first half of 2008/09, or EUR 7.8 million more than in the previous year. Of this amount, EUR 14.9 million represented equipment for the new plant in Spennymoor.

Balance sheet data in EUR million 31 October 2008 31 October 2007 30 April 2008
Total assets 1,133.6 1,160.8 1,105.9
Net debt 178.4 183.3 129.0
Equity 497.9 475.5 514.2
Equity ratio in % 43.9 41.0 46.5
Gearing in % 35.8 38.5 25.1
Average capital employed 661.3 650.1 650.2
ROCE in % 16.2 18.7 18.9
Investments 30.3 22.5 66.0
Working capital 244.1 289.9 232.9
As a % of rolling 12 month revenues 19.4 22.7 18.2

Solid balance sheet structure

The equity ratio decreased slightly to 43.9% from the level on 30 April 2008 following the dividend payment of EUR 31.3 million, the repurchase of shares for EUR 12.4 million and an increase of EUR 18.5 million in the provision for pensions that resulted from a decline in the fair value of the underlying plan assets. Net liabilities rose in accordance with the normal seasonal pattern and increased gearing from 25.1% to 35.8%. However, the balance sheet structure continued to show a steady improvement in comparison with the first half of the previous year.

Major Risks and Uncertainties in the Second Half of the 2008/09 Financial Year

Market risk

The major risks for the development of business in the Zumtobel Group during the second half of 2008/2009 and in 2009/10 are related above all to the dependency of selling markets on business activity in the commercial construction sector. The global economic crisis could lead to delays in the completion of existing contracts as well as the postponement or suspension of ongoing projects. Additionally, new construction projects could be postponed for an indeterminate period of time or cancelled due to a lack of

Foreign exchange risk

credit financing. However, it is now too early to precisely estimate the possible effects on the development of our business. The announced reduction and increased flexibility of costs in the production and sales areas are designed to minimise the consequences of this risk.

In order to safeguard its ability to meet payment obligations at all times, the Zumtobel Group concluded a five-year financing agreement in June 2008. This agreement has a total volume of EUR 480 million and provides the Group with sufficient financial latitude to meet all current and future challenges. Liquidity risk

The bank liabilities held by the Group carry variable interest rates. In order to utilise the currently favourable long-term Euro interest rates, the Zumtobel Group converted roughly one-third of its bank liabilities in November 2008 to fixed interest rates through an interest rate swap with a term ending in June 2013. Interest rate risk

The Zumtobel Group concludes forward exchange contracts to hedge the foreign exchange risk connected with non-Euro operating transactions. These hedging activities are intended to protect the net foreign currency positions that are derived from the budget for the next financial year before the start of this accounting period. Translation risks are not hedged. The main Group currencies are the EUR, GBP, USD, AUD and CHF. Management expects that the revenues recorded by the Zumtobel Group for the second half of 2008/09 will also be negatively influenced by the weak British Pound and Australian Dollar. In the 2009/10 financial year an increase in the value of the Euro compared with the GBP and AUD balances hedged in 2008/09 would generate a further negative transaction effect. Moreover, any increase in the strength of the US Dollar during 2009/10 would have an adverse impact on the purchase of goods in this currency.

Outlook for the Zumtobel Group

We expect a further deterioration in the economic climate during the 2009 calendar year. In order to substantially increase our flexibility to react to the noticeable decline in market demand, the Zumtobel Group has launched an efficiency improvement programme. These measures should lead to a sustainable reduction of roughly EUR 50 million in personnel and operating costs by the end of the 2010/11 financial year. Our primary objective is to adjust organisational and capacity costs as quickly as possible to reflect the current and expected developments in our markets and sales volumes, and also hold cash flow at a sound level under these difficult operating conditions. Based on the current negative economic trends and the fact that the major part of these cost savings will only provide relief for earnings beginning in 2009/10, our goal to record an EBIT margin of 8 to 9% for 2008/09 no longer appears realistic. However, we are convinced that our efficiency improvement programme and solid capital structure will allow the Zumtobel Group to emerge stronger from this difficult market situation.

Dornbirn, 9 December 2008

Chief Executive Officer Chief Financial Officer

Andreas Ludwig m.p. Thomas Spitzenpfeil m.p.

Income Statement

Q2
2008/09
Q2
2007/08
Change in
%
1st Half
Year
1st Half
Year
Change in
%
in TEUR 2008/09 2007/08
Revenues 324,460 343,039 (5.4) 641,130 666,100 (3.7)
Cost of goods sold (199,549) (208,757) 4.4 (394,949) (409,253) 3.5
Gross profit 124,911 134,282 (7.0) 246,181 256,847 (4.2)
as a % of revenues 38.5 39.1 38.4 38.6
Selling expenses (73,377) (72,768) (0.8) (148,897) (145,734) (2.2)
Administrative expenses (19,980) (19,520) (2.4) (38,935) (37,300) (4.4)
Other operating results (1,125) 11 <(100) (932) 875 <(100)
thereof special effects (1,616) (460) <(100) (2,652) (1,056) <(100)
Operating profit 30,429 42,005 (27.6) 57,417 74,688 (23.1)
as a % of revenues 9.4 12.2 9.0 11.2
Interest expense (5,429) (5,716) 5.0 (14,292) (11,277) (26.7)
Interest income 412 1,083 (62.0) 1,482 1,886 (21.4)
Other financial income and expenses 7,414 (3,881) >100 4,789 (4,830) >100
Profit/(loss) from associated companies 572 919 (37.8) 1,036 1,951 (46.9)
Financial results 2,969 (7,595) >100 (6,985) (12,270) 43.1
as a % of revenues 0.9 (2.2) (1.1) (1.8)
Profit before tax 33,398 34,410 (2.9) 50,432 62,418 (19.2)
Income taxes (4,254) (4,308) 1.3 (7,305) (7,172) (1.9)
Net profit for the year from continuing operations 29,144 30,102 (3.2) 43,127 55,246 (21.9)
Net profit for the year from discontinued operations (1,288) (195) <(100) (994) (195) <(100)
Net profit for the period 27,856 29,907 (6.9) 42,133 55,051 (23.5)
as a % of revenues 8.6 8.7 6.6 8.3
thereof due to minority shareholders (110) 107 <(100) (109) 302 <(100)
thereof due to shareholders of the parent company 27,965 29,800 (6.2) 42,241 54,749 (22.8)
Average number of shares outstanding - basic (in 1000 pcs.) 44,235 44,486 44,421 44,486
Average diluting effect (stock options) (in 1000 pcs.) 104 247 104 247
Average number of shares outstanding - diluted (in 1000 pcs.) 44,339 44,733 44,525 44,733
Earnings per share (in EUR)
Basic earnings per share 0.63 0.67 0.95 1.23
Diluted earnings per share 0.63 0.67 0.95 1.22
Earnings per share from continuing operations (in EUR)
Basic earnings per share 0.66 0.67 0.97 1.23
Diluted earnings per share 0.66 0.67 0.97 1.22

Balance Sheet

in TEUR 31 October 2008 in % 30 April 2008 in %
Goodwill 287,252 25.3 278,967 25.2
Intangible assets 44,728 3.9 40,635 3.7
Property, plant and equipment 237,047 20.9 211,222 19.1
Investments in associated companies 7,495 0.7 6,486 0.6
Financial assets 667 0.1 15,604 1.4
Other receivables & assets 4,210 0.4 5,338 0.5
Deferred taxes 49,461 4.3 43,035 3.9
Non-current assets 630,860 55.6 601,287 54.4
Inventories 170,271 15.0 162,181 14.7
Trade receivables 216,283 19.1 225,113 20.4
Other receivables & assets 34,073 3.1 28,750 2.6
Financial assets 41 0.0 497 0.0
Liquid funds 82,095 7.2 87,678 7.9
Available for sale assets 0 0.0 442 0.0
Current assets 502,763 44.4 504,661 45.6
ASSETS 1,133,623 100.0 1,105,948 100.0
Share capital 111,761 9.9 111,761 10.1
Additional paid-in capital 343,992 30.3 355,893 32.2
Reserves (2,254) (0.2) (48,409) (4.4)
Net profit for the period 42,241 3.7 92,986 8.4
Capital attributed to shareholders of the parent company 495,740 43.7 512,231 46.3
Capital attributed to minority shareholders 2,191 0.2 1,969 0.2
Equity 497,931 43.9 514,200 46.5
Provisions for pensions 58,621 5.2 35,762 3.2
Provisions for severance compensation 30,459 2.7 29,931 2.7
Other provisions 10,260 0.9 10,392 1.0
Borrowings 219,547 19.3 211,631 19.1
Other liabilities 672 0.1 1,012 0.1
Deferred taxes 10,733 0.9 10,224 0.9
Non-current liabilities 330,292 29.1 298,952 27.0
Provisions for taxes 30,319 2.7 29,196 2.6
Other provisions 18,261 1.6 21,121 1.9
Borrowings 40,973 3.6 5,024 0.5
Trade payables 130,546 11.5 144,326 13.1
Other liabilities 85,301 7.5 93,129 8.4
Current liabilities 305,400 26.9 292,796 26.5
EQUITY AND LIABILITIES 1,133,623 100.0 1,105,948 100.0

Cash Flow Statement

in TEUR 1st Half-Year
2008/09
1st Half-Year
2007/08
Operating profit from continuing and discontinued operations 56,422 74,494
Depreciation and amortisation 21,153 19,531
Other non-cash changes 1,604 1,204
Cash flow from operating results 79,179 95,229
Inventories (9,231) (5,832)
Trade receivables 15,405 (22,412)
Trade payables (17,472) (15,316)
Prepayments received 409 1,471
Change in working capital (10,889) (42,089)
Non-current provisions (2,905) 862
Current provisions (3,068) 749
Other current and non-current receivables and liabilities (8,293) 2,845
Change in other operating items (14,266) 4,456
Taxes paid (6,178) (4,429)
Cash flow from operating activities 47,846 53,167
Proceeds from the sale of non-current assets (130) 7,520
Capital expenditures (30,330) (22,502)
Change in non-current and current financial assets 13,317 4,374
Change in liquid funds from changes in the consolidation range (7,554) 0
Cash flow from investing activities (24,697) (10,608)
FREE CASH FLOW 23,149 42,559
Change in net borrowings 11,375 (16,003)
thereof restricted cash 162 261
Dividends (31,255) (22,487)
Share buyback / Exercise of options (11,901) 1,530
Interest paid (10,438) (8,930)
Cash flow from financing activities (42,219) (45,890)
Effects of exchange rate changes on cash and cash equivalents 1,624 (900)
CHANGE IN CASH AND CASH EQUIVALENTS (17,446) (4,231)
Cash and cash equivalents at the beginning of the period 86,163 118,970
Cash and cash equivalents at the end of the period 68,717 114,739
Change absolute (17,446) (4,231)

Statement of Changes in Equity

1st Half-Year 2008/09

Share
capital
Additional
paid-in
capital
Reserves Net profit
for the
period
Total Minority interests Total equity
111,761 355,893 (48,409) 92,986 512,231 1,969 514,200
0 0 92,986 (92,986) 0 0 0
0 0 0 42,241 42,241 (109) 42,132
0 (11,901) 0 0 (11,901) 0 (11,901)
0 0 (31,255) 0 (31,255) 0 (31,255)
0 0 3,223 0 3,223 141 3,364
0 0 (1,799) 0 (1,799) 0 (1,799)
0 0 651 0 651 0 651
0 0 (18,483) 0 (18,483) 0 (18,483)
0 0 832 0 832 0 832
0 0 0 0 0 190 190
111,761 343,992 (2,254) 42,241 495,740 2,191 497,931
Attributed to shareholders of the parent company

1st Half-Year 2007/08

Attributed to shareholders of the parent company
in TEUR Share
capital
Additional
paid-in
capital
Reserves Net profit
for the
period
Total Minority interests Total equity
30 April 2007 111,761 354,143 (129,074) 103,193 440,023 1,567 441,590
+/- Additions to reserves 0 0 103,193 (103,193) 0 0 0
+/- Net profit for the period 0 0 0 54,749 54,749 302 55,051
+/- Share buyback / Exercise of options 0 1,530 0 0 1,530 0 1,530
+/- Dividends 0 0 (22,280) 0 (22,280) (207) (22,487)
+/- Currency differences not recognised through
profit or loss
0 0 (2,420) 0 (2,420) (63) (2,483)
+/- Hedge accounting not recognised through profit
or loss
0 0 (264) 0 (264) 0 (264)
+/- Stock options 0 0 2,442 0 2,442 1 2,443
+/- Business combination achieved in stages 0 0 0 0 0 157 157
31 October 2007 111,761 355,673 (48,403) 54,749 473,780 1,757 475,537

Statement of recognised income and expense

in TEUR Q2 2008/09 Q2 2007/08
Net profit for the period 42,133 55,051
Hedge accounting 871 (352)
Actuarial (gain)/loss (25,670) 0
Deferred taxes 6,968 87
Income recognised directly in equity (17,831) (265)
Total 24,302 54,786
Attributed to shareholders of the parent company 24,411 54,484
Attributed to minority interests (109) 302

Notes

Accounting and Valuation Methods

The interim financial statements as of 31 October 2008 were prepared in accordance with the principles set forth in International Financial Reporting Standards (IAS 34, Interim Financial Reporting). The company has elected to make use of the option set forth in IAS 34 and provide selected explanatory notes.

The accounting and valuation methods remain unchanged as of 31 October 2008. Additional information on these methods is provided in the consolidated financial statements as of 30 April 2008.

The quarterly financial statements of all companies included in the consolidated financial statements were prepared in accordance with uniform accounting and valuation principles.

The condensed consolidated interim financial statements were prepared in accordance with all IFRS/IAS issued by the International Accounting Standards Board (IASB) as well as all interpretations (IFRIC/SIC) of the International Financial Reporting Interpretations Committee and Standing Interpretations Committee that were valid as of the balance sheet date and have been adopted by the European Union through its endorsement procedure.

Foreign Currency Translation

The major currencies used to translate the financial statements of subsidiaries into the euro are as follows:

Average exchange rate Income
Statement
Closing rate Balance sheet
1 EUR equals 31 October
2008
31 October
2007
31 October
2008
30 April 2008
AUD 1.7191 1.6132 1.9240 1.6610
CHF 1.5971 1.6526 1.4680 1.6140
USD 1.4894 1.3735 1.2750 1.5540
SEK 9.5008 9.2492 9.9060 9.3570
GBP 0.7925 0.6823 0.7869 0.7901
HKD 11.6076 10.7119 9.8880 12.1100

Consolidation Range

The condensed consolidated interim financial statements include all major Austrian and foreign companies that are controlled by Zumtobel AG.

The changes in the consolidation range during the interim financial period are shown below:

Consolidation Method
Consolidation Range full proportional at equity
30 April 2008 97 0 5
Included during reporting year for first time 4 0 0
Thereof newly founded 2 0 0
Thereof acquisition 2 0 0
Merged / liquidated during reporting year (1) 0 0
31 October 2008 100 0 5

As of 5 May 2008 Zumtobel acquired 100% of the shares in the Italian Space Cannon VH S.P.S. (now SpaceCannon), which is headquartered in Fubine. The preliminary allocation of the purchase price led to the recognition of TEUR 6,749 in goodwill. This company recorded net profit of TEUR 428 for the first two quarters of 2008/09.

In addition, 90% of the shares in Zumtobel Residential Lighting S.r.l. (formerly Oylight - now Zumtobel Residential), which is headquartered in Milan, were initially consolidated during May. The purchase price equalled TEUR 1,574. Goodwill disclosed during the preliminary allocation of the purchase price amounted to TEUR 1,535. This company reported a loss of TEUR 1,051 for the first half of 2008/09.

Zumtobel LED Illuminazione Holding srl, Italy, and Zumtobel Licht doo, Croatia, were founded during the first quarter of the reporting year.

Luxmate GmbH, Germany, was merged with Zumtobel Licht GmbH, Germany, in May 2008.

Notes to the Income Statement

The following comments explain the major changes to individual items in relation to the comparable prior year period.

Earnings per share

Basic earnings per share were calculated by dividing net profit for the period by the average number of shares outstanding as of the balance sheet date for these interim financial statements.

Diluted earnings per share are based on the assumption that that the options granted under the stock option programme (SOP/MSP) will be exercised. These shares are included in the calculation of the average number of shares outstanding.

Seasonality

Sales volumes are higher during the first two quarters of the financial year than during the second half-year for seasonal reasons; in particular, the third quarter lies significantly below the average. This distribution reflects the Group's dependency on developments in the construction industry as well as the seasonal distribution of business in this sector.

Expenses

The income statement was prepared in accordance with the cost of sales method. The cost of goods sold (incl. development expenses), selling expenses (incl. research expenses) and administrative expenses as well as other operating results include the following categories of expenses and income:

1st Half-Year 2008/09

in TEUR Cost of goods
sold
Selling
expenses
Administrative
expenses
Other
operating
results
Total
Cost of materials (270,575) (2,897) (312) 0 (273,784)
Personnel expenses (92,736) (73,843) (22,323) (24) (188,926)
Depreciation (17,175) (3,022) (955) 0 (21,152)
Other expenses (27,805) (65,882) (18,266) (2,720) (114,673)
Own work capitalised 7,043 18 513 0 7,574
Internal charges 3,041 (5,262) 2,221 0 0
Total expenses (398,207) (150,888) (39,122) (2,744) (590,961)
Other income 3,258 1,991 187 1,812 7,248
Total (394,949) (148,897) (38,935) (932) (583,713)

1st Half-Year 2007/08

in TEUR Cost of goods
sold
Selling
expenses
Administrative
expenses
Other
operating
results
Total
Cost of materials (281,652) (2,800) (177) (4) (284,633)
Personnel expenses (98,170) (72,364) (23,068) (48) (193,650)
Depreciation (15,913) (2,779) (839) 0 (19,531)
Other expenses (26,355) (65,754) (16,067) (1,116) (109,292)
Own work capitalised 6,156 3 205 0 6,364
Internal charges 2,871 (4,529) 1,659 (1) 0
Total expenses (413,063) (148,223) (38,287) (1,169) (600,742)
Other income 3,810 2,489 987 2,044 9,330
Total (409,253) (145,734) (37,300) 875 (591,412)

The cost of goods sold includes development costs of TEUR 16,701 (prior year: TEUR 14,241). Development costs of TEUR 6,840 were capitalised during the reporting period (prior year: TEUR 5,824), and the amortisation of capitalised development costs equalled TEUR 2,873 (prior year: TEUR 1,908).

Other Operating Results

in TEUR Q2
2008/09
Q2
2007/08
1st Half
Year
2008/09
1st Half
Year
2007/08
Government grants 0 101 584 1,154
License revenues 617 536 978 823
Special effects (1,616) (460) (2,652) (1,056)
Other impairment 0 (2,450) 0 (2,450)
Restructuring (1,600) (1,084) (2,636) (2,060)
Gains / losses on sale (16) 3,074 (16) 3,454
Miscellaneous (126) (166) 158 (46)
Total (1,125) 11 (932) 875

The license fees represent income from the LED business.

Special effects as defined in IAS 1 include the following major items:

Restructuring comprises, among other items, the costs for redundancy plans in Great Britain as well as other expenses incurred in connection with the construction of a plant in Spennymoor (TEUR 1,969). This position also includes expenses for redundancy plans in Australia (TEUR 462).

Interest Expense

The increase in interest expense compared with the prior year was related to non-recurring costs of TEUR 4,370, which were incurred in connection with the refinancing of the acquisition credit agreement. Interest expense also includes the interest component of the lease for the new factory in England (TEUR 883). The remaining TEUR 9,039 (prior year: TEUR 10,703) primarily represent interest expense for the current credit agreement.

Other Financial Income and Expenses

in TEUR Q2
2008/09
Q2
2007/08
1st Half
Year
2008/09
1st Half
Year
2007/08
Interest component as per IAS 19 less income on plan assets (708) (485) (1,365) (1,109)
Foreign exchange gains and losses (472) (1,869) (560) (495)
Market valuation of financial instruments 8,594 (1,527) 6,840 (3,058)
Impairment charges to financial assets 0 0 0 (360)
Gains / losses on sale 0 0 (126) 192
Total 7,414 (3,881) 4,789 (4,830)

Foreign exchange gains and losses consist above all of effects from the valuation of receivables and liabilities that are denominated in a foreign currency.

The market valuation of financial instruments shows the results from the valuation of forward exchange contracts at fair value as of the balance sheet date for the interim financial statements.

Income Taxes

The classification of income taxes into current and deferred taxes is shown in the following table:

in TEUR Q2
2008/09
Q2
2007/08
1st Half
Year
2008/09
1st Half
Year
2007/08
Current taxes (2,874) (3,150) (6,080) (6,472)
Deferred taxes (1,380) (1,158) (1,225) (700)
Income taxes (4,254) (4,308) (7,305) (7,172)

Results from Discontinued Operations

The negative results from discontinued operations resulted from a performance-based impairment charge of TEUR 1,288 to a receivable from the airfield business, which was recognised during the second quarter.

Notes to the Balance Sheet

The following comments refer to major changes in individual items compared to the balance sheet date on 30 April 2008.

Goodwill

The change in this position reflects the recognition of goodwill in SpaceCannon and Zumtobel Residential.

Intangible Assets

The change in this position is related primarily to the capitalisation of internally generated assets resulting from development projects.

Property, Plant and Equipment

The increase in property, plant and equipment resulted above all from the recognition of the newly constructed plant in Spennymoor, England.

Financial Assets

Non-current financial assets declined during the first half of 2008/09, primarily due to the sale of a fixed-interest financial asset that was contracted with a financial institution.

Provisions for Pensions

The increase in the provisions for pensions is related above all to a decline in plan assets in Great Britain.

Financial Liabilities

The increase in non-current financial liabilities resulted from the recognition of a finance lease for the Spennymoor plant in accordance with IAS 17. This lease has a volume of TEUR 20,345 and a term of 21 years. The increase in current financial liabilities was related to the use of short-term lines of credit.

On 12 June 2008 two five-year credit agreements were concluded with a consortium of seven banks; one of these credit agreements represents a framework contract The credits have a total volume EUR 480 million, whereby EUR 186 million were used to repay the EUR 200 million acquisition credit that was concluded in 2001. The remaining EUR 14 million were repaid from cash balances.

Notes to the Cash Flow Statement

Cash flow from operating activities decreased by only TEUR 5,321 compared with the first half of 2007/08, in spite of the TEUR 18,072 decline in operating profit. A significant improvement in the development of working capital was responsible for this standing.

Cash flow from investing activities was TEUR 14,089 less than the comparable prior year value. This change resulted above all from investments in the new plant in Spennymoor during the first half of 2008/09 as well as the sale of real estate during the first half of the prior year.

Cash flow from financing activities reflects the dividend payment of TEUR 31,255 that was made in August and the repurchase of the company's own shares for TEUR 12,387 during the second quarter of 2008/09.

Transition to cash and cash equivalents

in TEUR 31 October
2008
31 October
2007
Liquid funds 82,095 124,206
Not available for disposal (568) (2,610)
Demand deposits and others (12,810) (6,857)
Cash and cash equivalents 68,717 114,739

Notes to the Statement of Changes in Equity

Dividend

The Annual General Meeting on 29 July 2008 approved the payment of a EUR 0.70 dividend per share. A total of TEUR 31,255 was distributed to the shareholders of Zumtobel AG on 4 August 2008.

Stock Option Programme and Share Buyback

in psc. Total
30 April 2008 112,181
Share buyback 1,253,238
Exercised (64,625)
31 October 2008 1,300,794

The annual general meeting on 29 July 2008 authorised the Management Board of Zumtobel AG, with the approval of the Supervisory Board, to repurchase the company's shares at an amount equalling up to 10% of share capital for a minimum price of EUR 5.00 and a maximum price of EUR 50.00 per share; this authorisation is valid for a period of 18 months. The Management Board of Zumtobel AG decided on this same date to utilise the authorisation and repurchase up to 1,943,555 of the company's shares at a maximum price of EUR 20.50 by 11 February 2009. As of 31 October 2008 a total of 1,253,238 shares had been repurchased for TEUR 12,387.

A total of 64,625 stock options were exercised during the first half of 2008/09 (prior year: 191,771). The exercise price to be paid by employees equalled TEUR 486 (average price of EUR 7.5 per share; prior year, average price of EUR 8.0).

Reserve for Stock Options

in TEUR SOP MSP Total
30 April 2008 15,986 1,558 17,544
Addition through profit or loss 0 832 832
31 October 2008 15,986 2,390 18,376

The Stock Option Programme (SOP) has now been fully replaced by the Matching Stock Programme (MSP). No further options were allocated from the SOP.

The addition to the Matching Stock Programme (MSP) represents the options to be granted from the MSP I segments 2 and 3, MSP II segments 1 and 2 as well as MSP III segment 1 for a total of TEUR 832. The addition will be accrued over two years through profit or loss.

Related Party Transactions

Related parties include the Managing Board and Supervisory Board of Zumtobel AG. The company had no business relationships with related parties as of the closing date for the interim financial statements on 31 October 2008.

Supply and delivery transactions are conducted with associated companies at normal market conditions.

Contingent Liabilities and Guarantees

The Zumtobel Group holds contingent liabilities of TEUR 6 (30 April 2008: TEUR 440) for guarantees and warranties that do not meet the criteria for recognition as a provision. Bank guarantees of TEUR 8,894 (30 April 2008: TEUR 9,072) have been provided for various liabilities.

Subsequent Events

No events of significant importance occurred after the balance sheet date.

Segment Reporting

Business Segments

The following two subgroups represent the primary segments of business for the Zumtobel Group: the Lighting Segment (formerly the Zumtobel Lighting Division - lighting solutions, interior and exterior lighting, electronic-digital lighting and room management systems) and the Components Segment (formerly the TridonicAtco Division - electronic and magnetic lighting components). The prices charged on inter-segment sales reflect normal market conditions.

Segment assets and liabilities comprise directly allocated property, plant and equipment, intangible assets and working capital (excluding accrued interest, tax refunds and tax liabilities).

The column "Other and Consolidation" contains the assets, liabilities and related income statement items which were not allocated to the individual segments as well as property, plant and equipment, financial liabilities and taxes that relate to more than one segment.

2nd Quarter

Lighting Segment Components Segment Other & Consolidation Group
Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2
in TEUR 2008/09 2007/08 2006/07 2008/09 2007/08 2006/07 2008/09 2007/08 2006/07 2008/09 2007/08 2006/07
Net revenues 239,277 256,750 241,623 106,215 103,960 97,104 (21,032) (17,671) (17,644) 324,459 343,039 321,083
External
revenues 238,744 256,875 242,035 85,409 85,704 79,511 307 460 (463) 324,459 343,039 321,083
Inter
company
revenues 533 (125) (412) 20,806 18,256 16,926 (21,339) (18,131) (17,181) 0 0 0
Operating profit 20,193 30,510 22,117 13,398 12,499 10,361 (3,162) (1,004) 2,500 30,429 42,005 34,978
Investments 9,638 7,322 6,072 5,905 4,945 5,581 258 50 1,403 15,801 12,317 13,056
Depreciation (6,260) (6,106) (5,956) (3,877) (4,596) (4,566) (777) 1,236 (240) (10,915) (9,466) (10,763)

1st Half-Year

Lighting Segment Components Segment Other & Consolidation Group
in TEUR 1st Half
Year
2008/09
1st Half
Year
2007/08
1st Half
Year
2006/07
1st Half
Year
2008/09
1st Half
Year
2007/08
1st Half
Year
2006/07
1st Half
Year
2008/09
1st Half
Year
2007/08
1st Half
Year
2006/07
1st Half
Year
2008/09
1st Half
Year
2007/08
1st Half
Year
2006/07
Net revenues 473,941 492,680 468,376 208,838 209,003 192,490 (41,648) (35,583) (35,245) 641,130 666,100 625,621
External
revenues
472,296 492,936 468,335 168,246 172,532 157,348 588 632 (62) 641,130 666,100 625,621
Inter
company
revenues
1,645 (255) 41 40,592 36,471 35,142 (42,237) (36,216) (35,183) 0 0 0
Operating profit 35,633 51,752 43,333 27,711 24,842 20,659 (5,927) (1,906) 1,347 57,417 74,688 65,339
Investments 19,557 13,855 11,876 9,785 8,528 9,852 988 119 2,003 30,330 22,502 23,731
Depreciation (12,436) (12,153) (12,043) (7,645) (9,822) (9,362) (1,072) 2,443 1,140 (21,153) (19,531) (20,265)
in TEUR 31
October
2008
30 April
2008
30 April
2007
31
October
2008
30 April
2008
30 April
2007
31
October
2008
30 April
2008
30 April
2007
31
October
2008
30 April
2008
30 April
2007
Assets 756,034 754,848 728,292 243,389 233,295 242,104 134,200 117,805 174,983 1,133,623 1,105,948 1,145,379
Liabilities 282,664 281,339 293,825 98,051 96,774 102,283 254,977 213,635 307,681 635,692 591,748 703,789

Regional Segments

The distribution of countries to the individual regions is as follows:

DACH: Germany, Austria, Switzerland
Eastern Europe: Czech Republic, Croatia, Hungary, Poland, Romania, Russia, Slovakia, Baltic States
Northern Europe: Denmark, Finland, Norway, Sweden, Iceland
Western Europe: Great Britain, Benelux, France
Southern Europe: Italy, Spain, Greece, Turkey
America: North and South America
Asia: Countries in the Far East and Middle East
Other: Africa

The region "Europe" and the total Group level include various assets such as goodwill, which could not be directly allocated to secondary regions during the consolidation.

External revenues
in TEUR Q2 2008/09 Q2 2007/08 Q2 2006/07 1st Half-Year
2008/09
1st Half-Year
2007/08
1st Half-Year
2006/07
D/A/CH 84,853 86,598 77,515 162,852 162,430 151,844
Eastern Europe 21,860 21,441 19,151 40,468 35,630 33,388
Northern Europe 28,403 29,336 25,627 52,553 52,093 48,907
Western Europe 102,697 110,293 102,938 205,741 223,638 200,702
Southern Europe 26,026 31,564 27,042 59,913 68,302 59,348
Europe 263,839 279,232 252,273 521,527 542,093 494,189
Asia 23,568 22,468 26,294 45,169 42,952 47,362
Australia & New Zealand 26,810 30,235 28,442 52,953 57,185 55,616
America 8,202 8,565 11,042 16,440 18,384 21,570
Others 2,041 2,538 3,032 5,041 5,486 6,884
Other & Consolidation 0 0 0 0 0 0
Total 324,460 343,039 321,083 641,130 666,100 625,621
Assets Investments
in TEUR 31 October
2008
30 April 2008 30 April 2007 Q2 2008/09 Q2 2007/08 Q2 2006/07
D/A/CH 406,533 389,430 393,566 16,902 13,952 17,893
Eastern Europe 22,832 20,932 9,753 642 985 503
Northern Europe 30,608 31,346 29,162 770 496 326
Western Europe 182,613 178,089 178,887 10,865 4,237 2,659
Southern Europe 41,371 23,133 19,917 55 17 81
Europe 683,957 642,930 631,285 29,234 19,687 21,462
Asia 45,404 40,260 39,449 437 701 589
Australia & New Zealand 60,242 60,909 71,405 284 1,883 1,476
America 15,606 13,162 14,472 375 231 204
Others 0 0 0 0 0 0
Other & Consolidation 328,420 348,686 388,768 0 0 0
Total 1,133,623 1,105,948 1,145,379 30,330 22,502 23,731

Statement by the Management Board in accordance with § 87 (1) of the Austrian Stock Exchange Act

We confirm to the best of our knowledge that the condensed consolidated interim financial statements, which were prepared in accordance with International Financial Reporting Standards (IAS 34, Interim Financial Reporting), provide a true and fair view of the financial position and financial performance of the group and that the group management report on the first half-year provides a true and fair view of the financial position and financial performance of the group with respect to important events that occurred during the first six months of the financial year and their impact on the condensed consolidated interim financial statements as well as the principal risks and uncertainties for the remaining six months of the financial year and the major related party transactions disclosed.

Dornbirn, 9 December 2008

The Management Board

Andreas Ludwig Thomas Spitzenpfeil

Review Report

Introduction

We have reviewed the accompanying condensed consolidated interim financial information of

Zumtobel AG, Dornbirn,

as of 31 October 2008. This condensed consolidated interim financial information comprises the consolidated balance sheet as of 31 October 2008, the related consolidated statements of income, cash flows and changes in equity for the period then ended and a summary of significant accounting policies and other explanatory notes.

The Company's management is responsible for the preparation and fair presentation of this condensed consolidated interim financial information in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU.

Our responsibility is to express a conclusion on this condensed consolidated interim financial information based on our review. Our liability towards the Company and third parties with respect to this review is limited in accordance with para 275 Austrian Commercial Code (§ 275 (2) UGB).

Scope of Review

We conducted our review in accordance with Austrian standards for chartered accountants and with International Standard on Review Engagements (ISRE) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial information are not presented fairly in all material respects in accordance with International Financial Reporting Standards (IFRS) as adopted in the EU.

Comment on the Group Management Report for the six month period ended as of 31 October 2008 and the Declaration of the Company´s mamagement according to para 87 BörseG

We have read the Group Management Report for the six month period ended as of 31 October 2008 in order to see if it is not obviously contradictionary to the condensed consolidated interim financial information. In our opinion, the Group Management Report includes no obvious contradictions to the condensed consolidated interim financial information.

The Group Management Report for the six month period ended as of 31 October 2008 includes the declaration of the Company's management according to para 87 (1) fig 3 BörseG.

Vienna, 9 December 2008

KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft

Thomas Smrekar, Martin Wagner Certified Public Accountant

Service

Financial Terms
-----------------
Adjusted EBIT EBIT adjusted for special effects
Adjusted EBIT margin = Adjusted EBIT as a percentage of revenues
Adjusted EBITDA EBITDA adjusted for special effects
Average capital employed = Goodwill + intangible assets + tangible assets + inventories + trade receivables
– trade payables – provisions for income taxes – other provisions – other liabilities,
as average over a period of four quarters
CAPEX Capital expenditure
EBIT Earnings before interest and taxes
EBITDA Earnings before interest, taxes, depreciation and amortisation
Equity ratio = Equity as a percentage of assets
Gearing = Net debt as a percentage of equity
Net debt = Non-current borrowings + current borrowings – liquid funds
ROCE (Return On Capital Employed) = Total return based on adjusted EBIT as a
percentage of average capital employed
WACC Weighted average cost of capital (debt and equity)
Working capital = Inventories + trade receivables – trade payables – prepayments received

Financial Calendar

3rd Quarterly Report 2008/09 (1 May 2008 – 31 January 2009) 12 March 2009 Annual Results 2008/09 29 June 2009 Annual Shareholders' Meeting 24 July 2009 Ex-dividend day 28 July 2009 Dividend payout day 31 July 2009

Contact Information

Harald Albrecht Astrid Kühn-Ulrich Head of Investor Relations Head of Corporate Communications Telephone +43 (0)5572 509-1510 Telephone +43 (0)5572 509-1570 E-Mail [email protected] E-Mail [email protected]

Investor Relations Press / Corporate Communications

Financial Reports

Our financial reports are available for download under: http://www.zumtobelgroup.com. You can also order a copy by calling +43 (0)5572 509-1510.

More Information

on Zumtobel AG and our brands can be found in the Internet under:

www.zumtobelgroup.com www.zumtobel.com www.thornlighting.com www.zumtobellighteriors.com www.tridonicatco.com www.ledonlighting.com

Imprint

Publisher: Zumtobel AG, Investor Relations, Harald Albrecht Coordination: Lisa Pfurtscheller Coordination Financials: Christa Pfeiffer Translation: Donna Schiller Cover: Impressive lighting scenario outside the SpaceCannon offices in Fubine (Picture: SpaceCannon) Pictures: Danny Maddocks, Marcus Buck Copyright: Zumtobel AG 2008

Produced in-house with FIRE.sys

Disclaimer

This interim financial report includes statements on future developments, which are based on information available at the present time and involve risks and uncertainties that could cause the results realised at a later date to vary from these forward-looking statements. These statements on future developments are not to be under-stood as guarantees. On the contrary, future developments and results are dependent on a wide range of factors and connected with various risks and incalculable events. Moreover, they are based on assumptions that may prove to be incorrect. Included here, for example, are unforeseeable changes in the political, economic and business environment, especially in the regions where the Zumtobel Group operates, as well as the competitive situation, interest rates and foreign exchange rates, technological developments and other risks and incalculable events. Other risks may arise as a result of price developments, unforeseeable events in the operating environments of acquired companies or Group companies as well as ongoing cost optimisation programmes. The Zumtobel Group does not plan to update these forward-looking statements. This interim financial report is also presented in English, but only the German text is binding.

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