LISI S.A. — Interim / Quarterly Report 2013

Jul 24, 2013

HALF-YEARLY RESULTS

30th June, 2013

PRESS RELEASE

THE LISI GROUP RECORDS SALES GROWTH OF 7% AND A 45% INCREASE IN ITS OPERATING PROFIT IN THE 1ST HALF OF 2013

• The Group maintains a high level of business growth with a rebalancing of all divisions at the end of the period
• All divisions improve their performance and contribute to the 45% increase in EBIT
• Net income establishes itself at € 44.1 million despite non-recurring costs of € 6.2 million
• Free Cash Flow(1) remains positive (€ 18.6m) after the planned significant increase in investments (+28%)

Belfort, July 24, 2013 - LISI announced today its half-yearly results for the period ended June 30, 2013, submitted to the Board of Directors that was held today.

6-month period ended June 30th	H1 2013	H1 2012	Change
Main summarized income statement elements
Sales revenue	€m	594.8	557.7	+ 6.7 %
EBITDA	€m	97.7	74.8	+ 30.6 %
EBIT	€m	69.4	48.0	+ 44.6 %
Current operating margin	%	11.7	8.6	+ 3.1 pts
Income for the period attributable to holders of the company's shareholders' equity	€m	44.1	30.7	+ 43.6 %
Diluted earnings per share	4.21	2.95	+ 42.7 %
Main summarized cash flow statement elements
Operating cash flow	€m	78.8	57.0	+ €21.8 m
Net CAPEX	€m	42.7	33.4	+ €9.3 m
Free Cash Flow	€m	18.6	18.3	+ €0.3 m
Main elements of the financial situation
Net debt	€m	80.0	76.7(2)
Ratio of net debt to equity	%	13.3	13.3(2)

(1) Free Cash Flow: operating cash flow minus net industrial CAPEX and changes in working capital requirements.

(2) Figures at December 31, 2012

Analysis of sales revenue developments

Sales in €m	2013	2012	2013 / 2012
Q1	298.6	281.2	+6.2%
Q2	296.2	276.5	+7.1%
6-month period ended June 30th	594.8	557.7	+6.7%

The LISI Group achieved during the first half of 2013 sales revenue of € 594.8 million, an increase of +6.7% and +7.6% at constant scope and exchange rate. In particular, the second quarter benefited from growth throughout the divisions, with for example the restart of LISI AUTOMOTIVE and LISI MEDICAL which posted organic growth of 2.4% and 2.9% respectively, while with 13.0%, LISI AEROSPACE, as expected, is slowing down.

In total in the first half, the aviation industry accounts for 58% of the consolidated total (53% in 2012), the automotive industry for 37% (41% in 2012) and the medical industry for 5% (6% in 2012). Export sales account for 65% of the total, unchanged from 2012. The currency effect was almost neutral with an average USD at € 1.31 against € 1.30 in 2012.

The 44.6% increase in EBIT to € 69.4 million reflects the positive contribution of the three divisions, including the first fruits of the substantive actions undertaken in 2012 in the automotive and medical divisions. The aerospace division, for its part, contributed to high-level performance, and still accounts for more than 90% of the Group's EBIT. This improvement is the result of good coverage of fixed costs in the aerospace division, productivity gains from the LEAP program (LISI Excellence Achievement Program) throughout the divisions, and sustained investments in new equipment which were quickly implemented. Thus, at 11.7% over the six-month period, the Group has significantly exceeded its double-digit operating margin target. It should be noted that the Group's payroll expenses did not vary significantly between the first half of 2013 and the same period in 2012 (+ 3%): full time equivalent (FTE) jobs increased in the same proportion (4%) to reach 9,617 FTE jobs on average over the period.

The Group reports net profit of € 44.1 million, representing an increase of +43.6% compared to 2012, despite an additional allocation of € 6.2 million to cover the costs of the restructuring initiative launched in the automotive division, which was partially offset by lower interest expenses and an increase in foreign exchange gains. The actual tax rate was stable at around 31%: the effects of higher taxes in France were offset by lower tax rates in the United States and England. The effects of the CICE (employment initiative contract, approximately € 2 million) were recorded as a reduction in "Payroll expenses".

Free cash flow amounted to € 18.6 million against € 18.3 million in the first half of 2012 after very high investments of € 42.7 million (€ 33.4 million in 2012) made necessary by higher capacities and the development of new products. This reflects the high level of cash flow (13.3% of sales) and control over rising stocks at € 10 million or 4% compared to a business activity increase of 7.6%.

LISI AEROSPACE (58 % of total consolidated sales)

• Market remains buoyant
• New increase in EBIT (+46.9 % on H1 2012)
• Performances now near the top of cycle

Sales in €m 2013 2012 2013 / 2012 Q1 172.9 141.8 + 21.9 % Q2 169.8 151.4 + 12.1 % 6-month period ended June 30th 342.7 293.2 + 16.9 %

Analysis of sales revenue developments

The aviation market is driven by a favorable context of orders (1,548 aircraft for Boeing and Airbus) and a continued rise in rates to 601 units, against 566 in 2012. New orders are always supported by the growth of world traffic (+2.6% at end May 2013, source: IATA), as evidenced by the number of orders received at the Le Bourget Air Show (466 for Airbus, including 241 firm orders, and 431 for Boeing, including 294 firm orders). In this context, LISI AEROSPACE saw new orders continue to grow, despite the beginning of a decline in Europe (- 3% compared to H1 2012), while the US, although it is expected to, hasn't picked up yet.

The increase in sales is continuing at a steady pace but with a slight attenuation at the end of the period due to an unfavorable comparison base effect. The resilience of European business should be noted, despite the attenuation of the A350 effect. While the United States is growing, nevertheless it has not reached the expected level, and the volume of activity is even slightly declining in some sectors such as regional aircraft. The "Structural components" subdivision is maintaining its growth pace, which is correlated with increases in the production paces of aircraft manufacturers and the launch of a few new programs (A350, A320 NEO).

The performance of LISI AEROSPACE still improved in the first half of 2013 with EBIT of € 63.5 million and a gain of 3.8 percentage points in operating margin to 18.5% of sales. At the start of the year, the division took full advantage of the new organization set up in 2012. In the "Fasteners" division, with an almost unchanged fixed costs base, the margin on variable costs continued to improve, displaying a top of cycle level of EBIT. In the "Structural components" division, the volume effect does not play fully yet, as a result of the major recruitment of staff still undergoing training. The volume effect and the productivity of production labor, however, allow for such significant improvement. Free Cash Flow remains highly positive over the period due to high profitability in spite of the significant investments posted for € 26 million (€ 17 million in H1 2012) and a limited increase in net working capital (+ € 12 million) and tax disbursements (€ 5 million).

LISI AUTOMOTIVE (37 % of total consolidated sales)

• The global market growth offset the continued recession in the European market in Q2
• The inflection point for margin recovery remains to be confirmed

Sales in €m	2013	2011	2013 / 2012
Q1	110.2	121.9	- 9.7 %
Q2	110.2	109.3	+ 0.9 %
6-month period ended June 30th	220.4	231.3	- 4.7 %

Analysis of sales revenue developments

The decline of the European market is slowing down, with the drop in registrations, at -9.7% in Q1, being only -3.7% in Q2, while global registrations continue to grow (+2.5% in Q2). The same trend is being confirmed in the global performance of LISI AUTOMOTIVE's customers: sales were down - 2.2%, but their production is picking up by 1.2% in Q2, while the half-year is assessed at - 5 1%.

In this context which remains difficult in Europe, LISI AUTOMOTIVE has managed to complete successfully a number of significant new commercial projects through which the division has increased its market share in Germany and with global OEMs.

At 2.9% in the first half of 2013 against 1.8% a year earlier, the operating margin recovery started in Q2 2013 is the result of lower fixed costs (- 6.5% of payroll) and the absorption of most of the difficulties at some sensitive sites (Kierspe, Puiseux). The results of the Threaded fasteners business in Germany and Safety components are rather encouraging. The reorganization of the "Nuts" capacities has not yet resulted in a reduction of costs. Regarding that issue, the first effects of the consolidation of operations, according to the announced schedule, should not be felt until 2014. However, the costs for this project identified to date have been classified as non-recurring income with a net impact on the consolidated income of - € 6.2 million. The combination of the two Puiseux sites also significantly disrupted the recovery of the site's results, the positive effects being expected as of the last quarter of 2013.

Despite an unfavorable volume effect, these productivity initiatives have had the most positive impact on the profitability of the division as a whole (+ € 6.1 million), notably with the effective implementation of the LEAP (LISI Excellence Achievement Program) and the lower fixed costs mentioned above.

Free Cash Flow is balanced in the first half despite very high investments (€ 15 million recorded in 2013 against € 12.8 million in 2012) thanks to the adjustment of working capital requirements and the improvement of cash flow. The cash flow requirements are now stabilized at less than 20% of the division's sales revenue, despite the preparation for summer closures and the stocking of deliveries scheduled for August.

LISI MEDICAL (5% of total consolidated sales)

• Business level slightly down (- 4.4 %)
• Repositioning and development initiatives are under way

Sales in €M€	2013	2012	2013 / 2012
Q1	16.0	17.9	- 10.8 %
Q2	16.6	16.2	+ 2.8 %
6-month period ended June 30th	32.6	34.0	- 4.4 %

Analysis of sales revenue developments

The medical market is still in an adjustment phase that involves a need to reduce inventories in the sector. In the orthopedic market, volumes continue to grow but at a slower pace than before the 2009 crisis; According to the Orthoworld Institute, they gained 2% in Q1 2013 compared to the same period in 2012. In contrast, the outsourcing market should remain strong in the long term, once this washout period ends. In this context, the division is pursuing its efforts in terms of organization, adaptation and market capture, with the current launch of a "Private Label" that is in the industrialization phase.

LISI MEDICAL's order intake over the period was higher than in the first half of 2012 and the division enters the second half of the year with a fuller order book. Business was favorable for new customers and new products.

At 3%, the operating margin for the first half is stable while EBIT decreased by - 8.2% compared to the first half of 2012. While some inertia remains between the measures taken and their translation into results, the division's development prospects remain for the longer term. Thus, the division has added six new people to its R&D department, and is continuing its efforts in terms of organization, adaptation, and market capture. It plans in particular to launch a generic range that is currently in the process of industrialization.

Free Cash Flow was negative at € -3.4 million after the implementation of prototype and knee cells, as well as the adoption of new technologies.

2013-2014 OUTLOOK FOR THE LISI GROUP

The commercial aerospace market continues to have excellent visibility over time. But in the second half of 2013, LISI AEROSPACE will no longer enjoy such a favorable context, particularly in Europe, and the sources of growth expected in the United States will not bring sufficient momentum to maintain the exceptional growth rates enjoyed by the Fasteners business in the past two years. However, Structural components should always be driven by the ramp-up of new programs by manufacturers. In total, the very high comparison basis of H2 2012 and the effects of the stocking conducted in H1 2013, which will fade in the second half of the year, will not keep pace with the growth of the first half. Accordingly, the results of the aerospace division should remain at a high level without reaching the outstanding performance of the first part of the year.

According to forecasts by automakers, the European market may have bottomed out during the first half of 2013 and start to pick up again in the coming months. For its part, LISI AUTOMOTIVE enters the second half of 2013 with order books that are fuller than twelve months ago. These positive trends, compared to the collapse of the last quarter of 2012, should allow LISI AUTOMOTIVE to maintain the positive sales trajectory that began in the second quarter of the year. In addition to the reorganization measures already taken, all these positive elements should consolidate the recovery of the operating margin in the automotive division despite a second half usually less efficient due to the lower number of working days.

In the short term, the atypical conditions of the orthopaedics market should not change. LISI MEDICAL therefore maintains its industrial and technical adaptation efforts, such as the capture of new customers and new contracts, with the first significant effects not being expected before 2014.

The major heavy programs for the development of new products, the internationalization of sales, industrial excellence, the modernization of production tools and the reorganization efforts, launched in the past two years, began to display their full effect during the last six months. The pursuit of these action plans and the expected progress strengthen the Group's objective to maintain a two-digit operating margin rate, as was the case in the past twelve months, and positive Free Cash Flow.

Emmanuel Viellard Telephone: +33 (0)3 84 57 00 77 Email: emmanuel.viellard@lisi-group.com Website: www.lisi-group.com

The next publications will appear after the close of the Paris Euronext market Q3 2013 financial position: October 24, 2013

Membre de MiddleNext

The LISI Group is listed in the B compartment of NYSE Euronext Paris and belongs to the CAC Small, CACMid& Small, CAC – All Tradable and CAC-All Shares indices, ISIN code: FR 0000050353.

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LISI Group consolidated balance sheet

ASSETS

(in €'000)	30/06/2013	31/12/2012	06/30/2012**
LONG-TERM ASSETS
Goodwill Other intangible assets Tangible assets Long-term financial assets Deferred tax assets Other long-term financial assets	179 128 12 977 359 319 6 246 14 641 0	178 612 14 052 343 896 5 977 14 287 937	183 757 14 822 329 036 5 963 12 550 44
Other long-term assets Total long-term assets	998 573 309	557 763	546 172
SHORT-TERM ASSETS
Inventories Taxes – Claim on the state Trade and other receivables Cash and cash equivalents***	254 490 6 065 186 707 101 794	246 711 49 153 133 102 160	244 204 533 171 406 106 260
Total short-term assets	549 056	502 053	522 403
TOTAL ASSETS	1 122 365	1 059 816	1 068 575

TOTAL EQUITY AND LIABILITIES

(in €'000)	30/06/2013	31/12/2012	30/06/2012**
SHAREHOLDERS' EQUITY
Capital stock Additional paid-in capital Treasury shares Consolidated reserves Conversion reserves Other income and expenses recorded directly as shareholders' equity Profit (loss) for the period	21 573 70 803 (14 631) 487 102 (4 699) (3 348) 44 088	21 573 70 803 (14 616) 445 588 (2 383) (3 598) 57 287	21 573 70 803 (15 893) 448 162 4 851 (1 513) 30 730
Total shareholders' equity - Group's share	600 890	574 657	558 713
Minority interests	1 283	1 360	1 448
Total shareholders' equity	602 173	576 017	560 161
LONG-TERM LIABILITIES
Long-term provisions Long-term borrowings Other long-term liabilities Deferred tax liabilities	68 415 114 541 5 720 22 746	64 054 111 004 7 608 23 511	54 996 144 167 4 971 23 150
Total long-term liabilities	211 422	206 178	227 284
SHORT-TERM LIABILITIES
Short-term provisions Short-term borrowings* Trade and other accounts payable Taxes due	15 211 67 295 220 264 5 999	16 483 67 851 188 093 5 194	15 522 57 806 204 202 3 598
Total short-term liabilities	308 769	277 621	281 128
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES	1 122 365	1 059 816	1 068 572
* of which banking facilities	9 884	10 892	20 497

** The group has opted for early application as of January 1, 2012 of the revised IAS 19 standard; therefore, the financial statements for the first half of 2012 have been restated in accordance with the new rules for comparison purposes.

*** The item "Cash and cash equivalents" includes those elements that were posted until December 31, 2012 as "Other shortterm financial assets", the latter comprising marketable securities considered as cash equivalents.

LISI Group consolidated income statement

(in €'000)	30/06/2013	30/06/2012	31/12/2012
Pre-tax sales	594 841	557 705	1 081 341
Changes in stock, finished products and production in progress	5 420	2 965	9 105
Total production Other revenues *	600 261 8 235	560 670 7 407	1 090 446 16 925
Total operating revenues	608 496	568 077	1 107 371
Consumed goods Other purchases and external charges	(162 414) (110 295)	(160 237) (101 592)	(301 821) (204 490)
Value added	335 788	306 248	601 060
Taxes and duties Personnel expenses (including temporary employees)*	(4 616) (233 456)	(4 652) (226 781)	(8 674) (437 578)
EBITDA	97 716	74 815	154 808
Depreciation Net provisions	(28 455) 166	(26 951) 88	(55 560) 1 170
EBIT	69 427	47 952	100 418
Non-recurring operating expenses Non-recurring operating revenues	(8 001) 1 800	(1 956) 1 622	(9 267) 47
Operating profit	63 225	47 618	91 199
Financing expenses and revenue on cash	(177)	(2 314)	(3 664)
Revenue on cash Financing expenses Other interest revenue and expenses Other financial items Other interest expenses	1 216 (1 393) 1 870 7 981 (6 111)	743 (3 057) 1 576 9 194 (7 620)	1 006 (4 672) 1 295 15 413 (14 119)
Taxes (of which CVAE (Tax on Companies' Added Value)**	(20 850)	(16 205)	(31 715)
Profit (loss) for the period	44 068	30 674	57 115
attributable as company shareholders' equity Interest not granting control over the company	44 088 (20)	30 730 (56)	57 287 (172)
Earnings per share (in €):	4,21	2,95	5,47
Diluted earnings per share (in €):	4,21	2,95	5,47

LISI Group consolidated cash flow table

(in €'000)	30/06/2013	31/12/2012	30/06/2012
Operating activities
Net earnings	44 068	57 115	30 674
Elimination of net charges not affecting cash flows:
- Depreciation and non-recurrent financial provisions	28 655	59 444	26 951
- Changes in deferred taxes	(228)	(1 966)	(1 502)
- Income on disposals, provisions for liabilities and others	4 730	8 326	2 914
Gross cash flow margin	77 225	122 919	59 037
Net changes in provisions provided by or used for current operations	1 609	(3 241)	(2 041)
Operating cash flow	78 833	119 678	56 996
Income tax expense (revenue)	21 078	33 681	17 707
Elimination of net borrowing costs	1 446	3 390	2 172
Effect of changes in inventory on cash Effect of changes in accounts receivable and accounts payable	(9 984)	(6 030)	(3 166)
Net cash provided by or used for operations before tax	(2 412) 88 962	4 055 154 774	(165) 73 544
Taxes paid	(26 182)	(34 442)	(19 668)
Cash provided by or used for operations (A)	62 779	120 332	53 876
Investment activities
Acquisition of consolidated companies		(10)	(12)
Cash acquired
Acquisition of tangible and intangible fixed assets	(43 577)	(79 268)	(33 837)
Acquisition of financial assets
Change in granted loans and advances	(40)	(438)	(187)
Investment subsidies received
Dividends received
Total cash used for investment activities	(43 617)	(79 716)	(34 036)
Divested cash		744	744
Disposal of consolidated companies		2 805	2 805
Disposal of tangible and intangible fixed assets	834	857	455
		1
Disposal of financial assets
Total cash from disposals	834	4 407	4 004
Cash provided by or used for investment activities (B)	(42 783)	(75 309)	(30 032)
Financing activities
Capital increase		(16)
Net disposal (acquisition) of treasury shares
Dividends paid to shareholders of the Group	(14 674)	(13 531)	(13 531)
Dividends paid to minority interests of consolidated companies	26
Total cash from equity operations	(14 648)	(13 547)	(13 531)
Issue of long-term loans	4 760	37 665	28 242
Issue of short-term loans	15 889	704	276
Repayment of long-term loans	(3 052)	(4 041)	(2 181)
Repayment of short-term loans	(14 376)	(37 079)	(15 859)
Net interest expense paid	(1 425)	(3 510)	(1 965)
Total cash from operations on loans and other financial liabilities	1 796	(6 261)	8 513
Cash provided by or used for financing activities (C)	(12 852)	(19 808)	(5 018)
Effect of change in foreign exchange rates (D)	(1 318)	(2 435)	(786)
Effect of adjustments in treasury shares (D) *	(5 185)	496	(268)
Changes in net cash (A+B+C+D)	642	23 276	17 772
Cash at January 1st (E)	91 269	67 993	67 993
Cash at year end (A+B+C+D+E)	91 909	91 269	85 765
Cash and cash equivalents	101 793	102 160	106 260
Short-term banking facilities	(9 884)	(10 892)	(20 497)

Change in LISI Group consolidated shareholders' equity

(in € '000 )	Cap ital ck sto	Cap ed pre ital- link miu ms	Tre har asu ry s es	Con ed rese soli dat rves	Con sion ver rese rves	Oth er i and nco me exp ens es rde d d irec tly reco har eho lder s' as s ity equ	Pro fit fo r th e iod, per gro up sha re	Gro up' har f s s e o sha reh old ' ers ity equ	Min orit y inte ts res	Tot al s har eho lde rs' ity equ
Sha reh old ' eq uity at Jan y 1 , 20 12* ers uar	21 5 73	70 803	(15 46 1)	401 23 1	1 599	(1 6 90)	59 177	537 23 2	1 4 58	538 69 0
Pro fit ( loss ) fo r th riod N ( a) e pe Tra nsla tion diff ntia l (b) ere Pay ts in sha (c) men res Cap ital incr eas e Res f tre har es ( d) tate ts o men asu ry s			(43 2)	1 29 7	3 25 2	13	30 7 30	30 7 30 3 25 2 1 29 7 (41 9)	(56 ) 46	30 674 3 2 98 1 29 7 (41 9)
App riat ion of N -1 e ings rop arn Cha in met hod nge s Cha in s nge cop e Div iden ds d istri bute d Rec lass ifica tion				58 2 25 (12 ) (13 531 )			(58 225 )	(12 ) (13 53 1)		(12 ) (13 531 )
Res f fin ial i (f) tate ts o nstr nts men anc ume Var ious (e)						164		164		164
Sha reh old ' eq uity at Jun e 3 0, 2 012 * ers	21 5 73	70 803	(15 89 3)	448 16 2	4 8 51	(1 5 13)	30 730	558 71 3	1 4 48	560 16 1
inc lud ing tot al r d ex ste d fo eve nue s an pen ses po r the riod (a) (b) + ( c) + (d) + ( e) + (f ) pe +			(43 2)	1 2 97	3 2 52	17 7	30 730	35 024
(in € '000 )	Cap ital ck sto	Cap ed pre ital- link miu ms	Tre har asu ry s es	Con ed rese soli dat rves	Con sion ver rese rves	Oth er i and nco me exp ens es rde d d irec tly reco har eho lder s' as s ity equ	Pro fit fo r th e iod, per gro up sha re	Gro up' har f s s e o sha reh old ' ers ity equ	Min orit y inte ts res	Tot al s har eho lde rs' ity equ
Sha reh old ' eq uity at Jan y 1 , 20 13 ers uar	21 5 73	70 803	(14 6) 61	44 5 5 88	(2 3 83)	(3 5 98)	57 2 87	574 65 7	1 3 60	576 01 7
Pro fit ( loss ) fo r th riod N ( a) e pe Tra nsla tion diff ntia l (b) ere Pay ts in sha (c) men res Cap ital incr eas e Res tate ts o f tre har es ( d) men asu ry s Res tate ts a r IA S19 (g) men s pe riat ion of N -1 e	-	-	(15 )	57 2 88	(2 3 16)	724 279 628	44 088 288	44 088 (2 3 16) 724 0 264 628	(20 ) (57 ) -	44 068 (2 3 73) 724 0 264 628
App ings rop arn Cha in met hod nge s Cha in s e * nge cop Div iden ds d istri bute d Rec lass ifica tion				- - (14 ) 674			(57 )	0 0 0 (14 4) 67 0	- -	0 0 0 (14 ) 674 0
f fin (f) Res tate ts o ial i nstr nts men anc ume Var ious €				(1 1 00)		(1 3 81)		(1 3 81) (1 1 00)		(1 3 81) (1 1 00)
Sha reh old ' eq uity at Jun e 3 0, 2 013 ers	21 5 73	70 803	(14 63 1)	487 10 2	(4 6 99)	(3 3 48)	44 088	600 89 0	1 2 83	602 17 3
inc ing d fo lud tot al r d ex ste eve nue s an pen ses po r the riod (a) (b) + ( c) + (d) + ( e) + (f ) + (g) pe +					(2 3 16)	250	44 088	42 022	(77)	41 945

* Change in consolidation scope: repurchase of a minority share of LISI Medical for €12k on June 15, 2012

** Recognition of currency hedging intruments