CeoTronics AG — Interim / Quarterly Report 2007

Jan 12, 2007

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1. Business Report

Ladies and Gentlemen, Dear Shareholders,

CeoTronics increased its consolidated revenues by 15.0% to €9,331 thousand in the first six months of fiscal year 2006/2007, exceeding the previous year’s record level by €1,220 thousand.

This improvement in revenues is due among other things to continued government investment in digital radio technology in Spain (+67.6%) and France (+66.3%). However, CT-Video GmbH also increased its consolidated revenues by a substantial 11.1%.

The high level of revenues in the German market remained stable in the first six months of fiscal year 2006/2007 (+1.1%).

Revenue levels in Switzerland returned to normal as of November 30, 2006 at -61.6% because the country’s government security and law enforcement agencies will only continue the switch to digital radio technology in 2007.

Revenues in United Kingdom rose in the period under review from a low level by +10.0% year-on-year.

In Poland and the U.S.A., revenues fell from a low level by 6.1% and 33.0% respectively. As a result of the optimization of CeoTronics U.S.A.’s cost structure, we continue to believe that if earnings targets are met the results before depreciation and amortization/impairment can be narrowly positive. In the opinion of the Board, CeoTronics U.S.A.’s current revenues, cost, and earnings forecasts for the next six years do not necessitate any further adjustments of goodwill and the carrying amount of the investment at present.

The consolidated order backlog as of November 30, 2006 fell by 13.6% as against the record level in the previous year. The order backlog war the second highest in the company’s history.

EBITDA (Earnings before Interest, Taxes, Depreciation and goodwill Amortization/impairment) increased by €508 thousand compared with the Group’s prior-year H1 figure, from €1,055 thousand to €1,563 thousand; EBIT improved by €520 thousand in the same period, from €736 thousand to €1,256 thousand. The profit after tax for H1 rose by €307 thousand, from €409 thousand in the previous year to €716 thousand. Gross cash flow increased by €295 thousand year-on-year in the six-month period under review, from €728 thousand to €1,023 thousand.

Investments rose by €2,557 thousand as against the previous year, from €203 thousand to €2,760 thousand. Excluding real estate investments (which totaled €2,590 thousand including transaction costs), the level was somewhat lower than in the previous year.

Revenues and EBITDA, EBIT and the profit before and after tax all improved as well in Q2 as against the prior-year figures.

The Group’s extremely high equity ratio fell from 77.4% to 65.1%.The change is mainly due to the real estate acquisition.

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The consolidated key figures (IFRSs, unaudited) for the first six months of fiscal year 2006/2007 in comparison to the previous year were as follows:

Revenues

+15.0%

Cost of sales +18.1% R&D expenses +22.2% -1.5% Selling and marketing expenses General and administrative +14.7% expenses

The increase in the cost of sales (3.1 percentage points above revenue increase) was due to the rising proportion of higher-value components, changes in the order structure, the production times required by the RoHS (Restriction of Hazardous Substances Directive), and increased quality control costs.

The trend in research and development expenses reflects the increased effort involved in developing new products and modifying existing technologies, as well as increased personnel capacity.

Selling and marketing expenses fell slightly year-on-year because a number of trade fairs and advertising measures falling in the first six months of the previous year are scheduled for the second half of the current fiscal year 2006/2007.

Administrative expenses increased, primarily as a result of rising employee expenses and personnel capacity, as well as higher listing expenses and increased IR activities.

The CeoTronics Group employed a total of 142 staff (+7). All new jobs were created in Germany. The proportion of vocational trainees at the German CeoTronics AG and CT-Video GmbH is 5.6%.

At +14.3%, CeoTronics’ share price performed positively in the period under review (June 1 to November 30, 2006) (+18.6% after adjustment for the deduction of the dividend of €0.30).

The Executive Committee is extremely satisfied with the Company’s 6-month results and would like to thank the Company’s employees for their achievements to date.

Thanks to our current revenues and order backlog as well as the order forecast, we are upbeat on our revenues target of approx. €18.2 million and the target profit for the fiscal year 2006/2007 is €1,040 thousand (approx. +6.2%).

As a result of the expected and planned increase in expenses in the second half of fiscal year 2006/2007, among other things for:

• trade fair attendance and advertising,

• CE and RoHS audit costs in external laboratories,

• forward-looking investments in markets, technologies, quality control, and capacity,

• energy, and

• employer’s contributions to pension and health insurance,

CeoTronics will “only” be able to increase its H1 profit after tax by €324 thousand in the period up to the end of fiscal year 2006/2007 according to the

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information currently at its disposal.

However, the Board of Management would be satisfied with the anticipated increase in profit for the year of approx. 6.2% compared with 2005/2006.

The outlook for fiscal year 2007/2008, which begins on June 1, 2007, is positive due to the planed start of the switch to digital radio in Germany, among other things. In keeping with tradition, CeoTronics expects to issue its revenues and earnings targets for fiscal year 2007/2008 in January 2008, at the time of publication of its half-year results.

Rödermark, January 12, 2007

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Thomas H. Günther Chairman of the Board of Management and Chief Executive Officer

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Berthold Hemer Deputy Chairman of the Board of Management and Chief Technology Officer

Günther Thoma Member of the Board of Management Chief Operating Officer

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2. Consolidated Balance Sheet (IFRS)

2. Consolidated Balance Sheet (IFRS)
Assets	Quarterly Report(closing date of current quarter)November 30,2006	Annual Report(closing date of last annual report)May31,2006
	€ thousand	€ thousand
Current assets
Cash and cash equivalents	511	2,376
Trade receivables	4,771	2,571
Inventories	4,115	3,754
Other current assets	357	229
Total current assets	9,754	8,930
Noncurrent assets
Property, plant,and equipment	5,726	3,262
Intangible assets	177	180
Goodwill	1,326	1,364
Noncurrent financial assets	0	0
Deferred tax assets	466	535
Total noncurrent assets	7,695	5,341
Total assets	17,449	14,271

Equity and Liabilities	Quarterly Report(closing date of current quarter)November 30,2006	Annual Report(closing date of last annual report)May31,2006
	€ thousand	€ thousand
Current liabilities
Current financial liabilities	547	175
Tradepayables	976	679
Advancepayments received	203	147
Provisions	700	932
Current taxpayables	666	219
Other current liabilities	490	347
Total current liabilities	3,582	2,499
Noncurrent liabilities
Noncurrent financial liabilities	2,499	429
Total noncurrent liabilities	2,499	429
Equity
Subscribed capital	6,600	6,600
Capital reserves	4,471	4,471
Retained earnings	16	16
Cumulative other recognized income and expense	-33	-13
Net retainedprofit	266	226
Equityattributable to shareholders of CeoTronics AG	11,320	11,300
Minorityinterest	48	43
Total equity	11,368	11,343
Total equityand liabilities	17,449	14,271

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3. Consolidated Income Statement (IFRS)

Income Statement	Quarterly Report	Quarterly Report	Year-to-date	Year-to-date
	(current quarter)	(comparative quarter	(current fiscal year)	(comparative period of
		of previous year)		previous year)
	September 1, 2006-	September 1, 2005-	June 1, 2006-	June 1, 2005-
	November 30,2006	November 30,2005	November 30,2006	November 30,2005
	€ thousand	€ thousand	€ thousand	€ thousand
Revenues	5,532	4,268	9,331	8,111
Cost of sales	-2,701	-2,007	-4,630	-3,922
Grossprofit	2,831	2,261	4,701	4,189
Sellingand marketingexpenses	-1,095	-1,056	-1,964	-1,993
General and administrative expenses	-474	-407	-833	-726
Research and development expenses	-377	-287	-649	-531
Other operatingincome and expenses	10	-170	15	-102
Impairment ofgoodwill	-5	0	-14	-101
Operating profit (EBIT)	890	341	1,256	736
Interest income/expense	-20	-10	-15	-13
Profit before tax	870	331	1,241	723
Income tax expense	-364	-117	-525	-314
Consolidatedprofit	506	214	716	409
Consolidatedprofit attributable to:
Minorityinterest	4	9	4	7
Shareholders of CeoTronics AG	502	205	712	402
Earningsper share (basic) in €	0.23	0.09	0.32	0.18
Earningsper share (diluted) in €	0.23	0.09	0.32	0.18
Weighted average shares outstanding(basic)	2,199,998	2,199,998	2,199,998	2,199,998
Weighted average shares outstanding(diluted)	2,199,998	2,199,998	2,199,998	2,199,998

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4. Consolidated Cash Flow Statement (IFRS)

Cash Flow Statement	Year-to-date(current fiscal year)June 1,2006-November 30,2006	Year-to-date(comparative periodof previous year)June 1,2005-November 30,2005
	€ thousand	€ thousand
Cash flow from operatingactivities
Profit before tax	1,241	723
Income tax expense	-525	-314
Consolidatedprofit	716	409
Depreciation,amortization,and impairment losses	307	319
Gross cash flow	1,023	728
Changes in assets and liabilities
Change in trade receivables	-2,200	-1,121
Change in inventories	-361	-144
Change in other assets	-128	38
Change in tradepayables	297	296
Change in advancepayments received	56	-27
Change in otherprovisions	-232	-393
Change in taxpayables	447	88
Change in other current liabilities	143	171
Change in deferred tax liabilities	69	178
Total changes in assets and liabilities	-1,909	-914
Net cash used in operatingactivities	-886	-186
Cash flow from investingactivities
Payments to acquire intangible assets	-25	-10
Payments to acquireproperty, plant,and equipment	-2,735	-193
Change in noncurrent financial assets	0	4
Change in foreign currencydifferences	29	-48
Disposal of noncurrent assets (net carryingamounts)	2	1
Net cash used in investingactivities	-2,729	-246
Cash flow from financingactivities
Change in current financial liabilities	372	-100
Change in noncurrent financial liabilities	2,070	-97
Dividendpayment to minorityinterest	-12	0
Dividendpayment to shareholders of CeoTronics AG	-660	-440
Net cashprovided by/used in financingactivities	1,770	-637
Change in cash and cash equivalents	-1,845	-1,069
Effect of exchange rate changes on cash and cash equivalents	-20	3
Cash and cash equivalents at beginningofperiod	2,376	2,243
Cash and cash equivalents at end ofperiod	511	1,177

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5. IFRS Statement of Changes in Equity

	Equityattributable to shareholders of CeoTronics AG	Equityattributable to shareholders of CeoTronics AG	Equityattributable to shareholders of CeoTronics AG	Equityattributable to shareholders of CeoTronics AG	Equityattributable to shareholders of CeoTronics AG	Equityattributable to shareholders of CeoTronics AG
	Subscribedcapital	Capitalreserves	Retainedearnings	Net retainedprofit/netaccumulatedlosses	Cumulativeotherrecognizedincome andexpense	Total	Minorityinterest	Total equity
	€ thousand	€ thousand	€ thousand	€ thousand	€ thousand	€ thousand		€ thousand
Currentyear
Balance at May31,2006	6,600	4,471	16	226	-13	11,300	43	11,343
Consolidatedprofit				712		712	4	716
Dividend distribution				-660		-660	-12	-672
Currencytranslation adjustments					-20	-20		-20
Change in minorityinterest				-12		-12	13	1
Balance at November 30,2006	6,600	4,471	16	266	-33	11,320	48	11,368
Previous year's figures forcomparison
Balance at May31,2005	6,600	4,471	16	-283	-33	10,771	48	10,819
Consolidatedprofit				402		402	7	409
Dividend distribution				-440		-440		-440
Currencytranslation adjustments				1	25	26		26
Change in minorityinterest							-23	-23
Balance at November 30,2005	6,600	4,471	16	-320	-8	10,759	32	10,791

The equity ratio of the CeoTronics Group was 65.1% as of November 30, 2006 (previous year: 77.4%). There were no material changes to equity and stock option plans compared with the last annual financial statements.

6. Notes to the Consolidated Report of CeoTronics AG on the First Six Months Ended November 30, 2006

The unaudited consolidated quarterly report of CeoTronics AG as of November 30, 2006 was prepared in accordance with the International Financial Reporting Standards (IFRSs). This interim report complies with IAS 34 Interim Financial Reporting.

The quarterly report was prepared using the accounting, measurement and consolidation principles applied in the preparation of the consolidated annual financial statements as of May 31, 2006. Further details can be found in the Annual Report for fiscal year 2005/2006.

As of November 1, 2006, the Company acquired a property it had previously been renting, together with an adjacent car park, in Rödermark. The purchase price totaled €2,490 thousand.

To finance the acquisition, the Company took out a loan in the amount of €2,100 thousand as of November 1, 2006. The amount of €390 thousand exceeding the financing was financed out of the Company’s own funds. The loan agreed provides for annual redemption of 4%; the interest rate is fixed for 10 years. The remaining amount of the loan as of November 30, 2006 is €2,093 thousand. The proportion attributable to current financial liabilities is €86 thousand; the remaining amount of €2,007 thousand was classified as noncurrent financial liabilities.

7. Consolidated Segment Reporting

The Company assesses the performance of the subsidiaries on the basis of their pre-tax profit. The accounting and reporting principles used for regional reporting comply with the group accounting principles. The subsidiaries in the individual countries are legally independent and have their own management teams.

The Company's product groups are comparable in terms of both the production process used and the marketing methods. Internal and external reporting primarily follows geographic criteria.

The information below is presented by region.

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Revenues for the first six months of 2006/2007 and 2005/2006 are attributable as follows:

Country of origin (primary segment):

	H1 2006/2007	H1 2005/2006
Revenues	€ thousand	€ thousand
Germany	4,236	4,122
Rest of Europe	4,916	3,722
Rest of world	179	267
Third-partyrevenues	9,331	8,111

By customer country (secondary segment):

	H1 2006/2007	H1 2005/2006
Revenues	€ thousand	€ thousand
Germany	2,499	2,679
Rest of Europe	6,632	5,120
Rest of world	200	312
Third-partyrevenues	9,331	8,111

The profit or loss for the first six months of 2006/2007 and 2005/2006 is attributable as follows to the subsidiaries in the various regions:

	H1 2006/2007	H1 2005/2006
Profit/loss	€ thousand	€ thousand
Germany	420	390
Rest of Europe	510	367
Rest of world	-218	-355
Consolidatedprofit	712	402

Segment assets are attributable as follows to the subsidiaries in the various regions (primary segment) as of November 30, 2006 and November 30, 2005:

	November 30,2006	November 30,2005
Segment assets	€ thousand	€ thousand
Germany	10,207	8,038
Rest of Europe	5,708	3,697
Rest of world	1,534	2,141
Total segment assets	17,449	13,876

Segment liabilities are attributable as follows to the subsidiaries in the various regions (primary segment) as of November 30, 2006 and November 30, 2005:

	November 30,2006	November 30,2005
Segment liabilities	€ thousand	€ thousand
Germany	4.739	2.332
Rest of Europe	1.301	729
Rest of world	40	23
Total segment liabilities	6.080	3.084

Noncurrent assets are attributable as follows to the subsidiaries in the various regions (primary segment) as of November 30, 2006 and November 30, 2005:

	November 30,2006	November 30,2005
Noncurrent assets	€ thousand	€ thousand
Germany	5,760	3,210
Rest of Europe	585	627
Rest of world	884	994
Total noncurrent assets	7,229	4,831

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Investments in the first six months of 2006/2007 and 2005/2006 are attributable as follows to the subsidiaries in the various regions (primary segment):

	H1 2006/2007	H1 2005/2006
Investments	€ thousand	€ thousand
Germany	2,713	147
Rest of Europe	47	56
Rest of world	0	0
Total investments	2,760	203

Depreciation, amortization, and impairment losses are attributable as follows to the subsidiaries in the various regions (primary segment) in the first six months of 2006/2007 and 2005/2006:

	H1 2006/2007	H1 2005/2006
Depreciation,amortization,and impairment losses	€ thousand	€ thousand
Germany	262	188
Rest of Europe	35	17
Rest of world	10	114
Total depreciation,amortization,and impairment losses	307	319

8. Reportable Securities Holdings

8. Reportable Securities Holdings	8. Reportable Securities Holdings
Reportable securities holdings as of November 30, 2006		CeoTronics shares(ISIN DE0005407407/WKN 540740) (quantity)	Virtual CeoTronics stockoptions (quantity)
Board of Management
Chairman of the Board of Management	Thomas H. Günther	9,498	2,000
Chief TechnologyOfficer	Berthold Hemer	171,050	2,000
Chief OperatingOfficer	Günther Thoma	6,022	2,000
SupervisoryBoard
Chairman	Hans-Dieter Günther	371,200	0
DeputyChairman	Horst Schöppner	218,470	0
Member of SupervisoryBoard	Stephan Haack	0	0

The total number of CeoTronics AG shares at the reporting date amounted to 2,199,998. Dividends amounting to €659,999.40 were paid in the period under review in accordance with the resolution by the General Meeting on November 3, 2006.

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9. CeoTronics Shares

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----- Start of picture text ----- CEOTRONICS AG O.N. TECDAX (PERFORMANCEINDEX) TECHN. ALL SHARE P-IN.120,00ISIN DE0005407407/WKN 540740115,00110,00 CeoTronics shares incomparison to indices105,00 since June 1, 2006(indexed)100,0095,0090,0085,00 Source:01.06.200608.06.200615.06.200622.06.200629.06.200606.07.200613.07.200620.07.200627.07.200603.08.200610.08.200617.08.200624.08.200631.08.200607.09.200614.09.200621.09.200628.09.200605.10.200612.10.200619.10.200626.10.200602.11.200609.11.200616.11.200623.11.200630.11.2006----- End of picture text -----

At +14.3%, CeoTronics AG’s share price performed positively in the period under review. After adjustment for the dividend of €0.30 paid in the reporting period, the increase amounts to 18.6%.

In the period under review, CeoTronics shares significantly outperformed the TECDAX by 9.2 percentage points and the Technology All Share by 10.8 percentage points.

The latest study by German Business Concepts GmbH dated October 2006 calculated a fair value of €10.38 for CeoTronics shares. The current share price (January 11, 2007) of €8.19 (Xetra) therefore offers long-term investors attractive growth potential.

If business continues to develop positively and the revenues and earnings targets are met, the Board of Management plans to propose a dividend for the fourth consecutive time.

10. Changes in the Consolidated Group Structure

There were no changes in the scope of consolidation in the first six months of fiscal year 2006/2007.

The following companies are included in the consolidated financial statements:

CeoTronics AG (Rotkreuz, Switzerland), CeoTronics Sarl (Brie Comte Robert, France), CeoTronics Ltd. (Bestwood Village, Nottingham, United Kingdom), CeoTronics Inc. (Virginia Beach, U.S.A.), CeoTronics S.L. (Madrid, Spain), CT-Video GmbH (Lutherstadt Eisleben, Germany), AACOM-CeoTronics Sp.z.o.o. (Lodz, Poland).

Subsidiaries in which the parent directly or indirectly holds the majority of shares and hence of the voting power are consolidated in accordance with the principles of acquisition accounting under IFRSs.

We account for the 25% minority interest in AACOM-CeoTronics Sp.z.o.o. by deducting the minority interest and the resulting effects on profit or loss within equity in the balance sheet, in the income statement, the cash flow statement, and the statement of changes in equity.

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11. Changes in the Company's Executive Bodies

There were no changes in the Company's executive bodies in the first six months of 2006/2007.

12. Current Financial Calendar (as of January 12, 2007)

Preliminary publishing of revenue and order backlog after 9 months of the fiscal year 2006/2007

End of calendar week 9 / beginning of calendar week 10 Friday, April 13, 2007 Thursday, May 31, 2007

Report on Q3 2006/2007

End of fiscal year 2006/2007

Preliminary publishing of revenue and order backlog of the annual financial statements 2006/2007

Calendar week 23

Annual earnings press conference 2007 Analyst meeting 2007

Thursday, August 30, 2007 Thursday, August 30, 2007

Preliminary publishing of revenue and order backlog after 3 months of the fiscal year 2006/2007

Calendar week 36

Friday, October 12, 2007 Friday, November 2, 2007

Report on Q1 2007/2008 General Meeting 2007

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CeoTronics AG 63322 Rödermark (Germany) Adam-Opel-Str. 6 Tel. +49 6074 8751-722 Fax +49 6074 8751-720 E-mail: investor.relations@ceotronics.com

www.ceotronics.com

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