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annual report 2006/07

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at a glance chf million bookings operating revenue ebit earnings from continuing operations cash flow shareholders equity roe roce 2006/07 221.6 215.7 20.2 14.9 18.8 98.9 11.7 19.1 2005/06 201.8 201.6 14.8 11.5 15.5 111.6 10.9 13.9 9.8 7.0 36.5 29.6 21.3 11.4 ­ ­ 2006/07figuresreflecttheresultsofcontinuingoperations 2005/06figureshavebeenrestatedtoreflecttheeffectofthediscontinuance ofthechannelaccessfulfilmentdivision revenue distribution by geographical region 5 25 revenue distribution by product lines 5 14 3 26 2006/07 16 70 2006/07 19 17 emea north america asia sensors controls solid-state switching electromechanical products electronic packaging fieldbus others distribution of employees by activity 95 466 2006/07 631 manufacturing sales marketing administration r&d

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five-year financial summary chf 1 000 bookings orderbacklog operatingrevenue grossprofit ebitda ebit earningsbeforetaxesandminorities netincomefromcontinuingoperations netincomeincluding discontinuedoperations cashflow depreciationandamortisation additionstofixedassets accountsreceivable inventories networkingcapital currentassets fixedassets,net intangibleassets,net interest-bearingdebt,net currentliabilities long-termliabilities minorities shareholders equity totalliabilitiesandshareholders equity numberofemployeesaverage 2006/07 221.6 50.8 215.7 100.9 25.0 20.2 19.0 14.9 11.5 18.8 4.8 5.1 59.3 40.4 58.7 126.8 23.2 29.7 7.2 71.3 11.9 ­ 98.9 182.2 1 192 2005/06 201.8 44.7 201.6 92.1 19.1 14.8 15.1 11.5 12.2 15.5 4.3 5.4 63.1 32.7 52.3 128.7 23.9 33.8 5.1 66.3 13.2 ­ 111.6 191.2 1 126 10.7 4.4 4.6 64.3 31.4 52.2 111.3 22.5 32.6 8.3 61.5 13.1 0.1 100.8 175.5 1 041 10.4 5.3 3.5 57.7 30.9 46.0 111.6 22.8 33.0 17.4 74.1 16.2 0.2 95.9 186.4 999 5.8 6.4 4.7 59.9 31.0 49.7 110.2 32.6 33.5 37.2 82.7 22.9 0.5 89.7 195.8 1 033 2004/05 207.0 45.5 201.8 84.2 14.4 10.0 8.9 6.8 2003/04 206.5 43.2 203.8 81.7 13.8 8.5 6.8 5.2 2002/03 208.9 42.4 204.8 74.7 6.0 -0.4 -2.6 -2.7 at a glance/five-year financial summary 2006/07figuresreflecttheresultsofcontinuingoperations 2005/06figureshavebeenrestatedtoreflecttheeffectofthediscontinuanceofthechannelaccessfulfilmentdivision andarenotcomparablewithpreviousperiods netincome+depreciation+amortisation+changeinprovisions­gainlossonsaleofinvestmentsorassets

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information for investors information for investors registered shares nominalvaluechf3 sharesissued shareofcapital shareofvotingrights shareprice bearer shares nominalvaluechf15 sharesissued shareofcapital shareofvotingrights sharepriceasofmarch31 shareprice-high shareprice-low averagedailyvolume p/eratio basicearningspershare bookvaluepershare stockmarketcapitalisation -inpercentageofrevenue -inpercentageofequity dividendpershare -dividendyield -totalpay-out -pay-outratio sharecapitalrepaymentpershare restriction of voting rights therearenolimitsonregistrationofvotingrights conditional share capital as of march 31 2007 35270bearershares chf 529 050 forissuetoemployeesandmembersoftheboardofdirectors ofthecompanyorsubsidiaries number chf chf chf number factor chf chf chf 1 000 chf chf 1 000 chf 390 710 55.0 19.6 275 278 183 922 13.1 21.0 139 195 445 90.6 197.6 7.0 2.5 4 975 33.4 ­ 390 710 55.0 19.6 209 229 103 1 366 12.2 17.1 157 148 500 68.5 133.0 ­ ­ ­ ­ 35.0 390 710 55.0 19.6 116 121 74 962 12.1 9.6 142 82 400 40.8 81.7 5.0 4.3 3 554 52.3 ­ 390 710 55.0 19.6 80 83 28 708 11.0 7.2 135 56 500 27.7 58.9 2.0 2.5 1 421 27.6 ­ 390 710 55.0 19.6 28 80 28 258 ­ -3.8 126 19 900 9.7 22.2 ­ ­ ­ ­ ­ number 1 600 000 45.0 80.4 1 600 000 45.0 80.4 1 600 000 45.0 80.4 1 600 000 45.0 80.4 1 600 000 45.0 80.4 2006/07 2005/06 2004/05 2003/04 2002/03 theregisteredsharesarenottradedonthestockexchange financial calendar shareholders meeting2006/07 interimreport2007/08 pressandfinancialanalysts meeting2007/08 shareholders meeting2007/08 basedoncontinuingoperationsonly proposaloftheboardofdirectors july26,2007,atthecongresscentermetalli,zug november16,2007 june24,2008,atthehotelwidder,zurich july24,2008,atthecongresscentermetalli,zug

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information for investors share price 1.4.2006 ­ 31.3.2007 chf 300 280 260 240 220 200 180 160 apr may june july aug sept oct nov dec jan feb mar carlo gavazzi bearer share spi extratm rebased share volume 1.4.2006 ­ 31.3.2007 number 24 000 20 000 16 000 12 000 8 000 4 000 apr may june july aug sept oct nov dec jan feb mar carlo gavazzi bearer share share price 1.4.2002 ­ 31.3.2007 chf 325 275 225 175 125 75 25 2002/03 2003/04 2004/05 2005/06 2006/07 carlo gavazzi bearer share spi extratm rebased

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carlo gavazzi group annual report 2006/07

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annual report 2006/07 index corporate letter to the shareholders review of operations group profile 4 6 8 business units automation components computing solutions 10 12 corporate governance 15 consolidated financial statements statements of consolidated income consolidated balance sheets statements of changes in equity statements of consolidated cash flows report of the group auditors 24 25 26 27 42 notes to consolidated financial statements 28 financial statements statements of income balance sheets statements of changes notes to financial statements report of the statutory auditors 44 45 46 47 48 carlo gavazzi group

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letter to the shareholders in 2006/07 carlo gavazzi experienced another outstanding year of growth globally increased market share and significantly improved profitability ­ebitimprovedby37%tochf20.2millionor9.4%ofoperatingrevenue ­earningsfromcontinuingoperationsroseby30%tochf14.9millionor6.9%ofoperatingrevenue ­bookingsgrewby10%tochf222millionandoperatingrevenueby7%tochf216million ­thecarlogavazzisharepriceincreasedfromchf209tochf275,despitethecapitalrepaymentofchf35pershare ­sinceitslowpointatmarch31,2003,themarketcapitalisationofthecompanyincreasedten-fold managementisconfidentthatwiththeprevailingeconomicconditions,carlogavazziwillfurtherimproveitsmarket positionanditsfinancialperformanceduring2007/08.inordertoassurefuturegrowth,thegroupwillcontinuetopursue thechosensuccessfulstrategy strategy application-driven product development carlogavazzicontinueditseffortsindesigningnewhardwarethatmeetsthespecificationsofourcustomers nextgenerationproducts.thegroupaimsatprovidingitscustomersarangeofalignedproductsideallyfittingthetargeted applications.inordertocopewithdevelopmentdemandandtoassuretechnologicalleadership,carlogavazzihas strengtheneditsdevelopmentresources.consequently,anumberofnewproductswithhighturnoverpotential,featuring enhancedspecificationsandlowercost,wereintroducedtothemarket global coverage theinvestmentscarlogavazzimadeoverthelasttwoyearsinestablishingapresenceinthefastgrowingsouth-eastasianregionarebearingfruit.thegroupestablishedanetworkofeightsalesofficesandafullyfledgedmanufacturing operationinthisregionthatproducesabroadrangeofhigh-qualityautomationcomponents.thegrowingcustomerbase forcomponents,nowalsoextendingtomostofthesouth-east-asiancountries,evidencestheglobalacceptanceand competitivenessofcarlogavazzi sautomationproducts the business units automation components ­ gain of market share withanincreaseinbookingsof12%andoperatingrevenueof9 thebusinessunitclearlyoutpacedglobalmarket growth,estimatedat4 ingeographicalterms,automationcomponentsachievedparticularlyhighgrowthratesin south-east-asiawherebookingsgrew,albeitfromasmallbase,by33%andoperatingrevenueby24 followedby europe,wherebookingsandrevenuegrewby14 instead,thelessfavourableeconomicconditionsintheusand canadianfactoryandbuildingautomationmarketslimitedbookingsexpansioninnorthamericato4%inlocalcurrency revenueintheprioritymarketsegmentsexpandedatahigh22%rate,therebyconfirmingthecustomers appreciationof theproductoffering.theoperatingprofitof13%ofsalesinthereportingperiodisanexcellentbase,allowingthebusiness unittofurtherexpanditsinvestmentsfornewproductsandtostrengthenitsglobalmarketingandsalesorganisation.the objectiveremainstoprofitablyexpandsalesofautomationcomponentswellinexcessofmarketgrowthandtofurther increaseitsgeographicalcoverage computing solutions ­ concentration on core competences thenon-exclusivedistributionofthird-partyactivevoice-recognitionboardsbycomputingsolutionshasbeenterminated bythesupplier,negativelyaffectingrevenueandoperatingprofitbyusd5.8millionandusd0.6million,respectively withouttheseproducts,thedistributionbusinessmissestherequiredcriticalmassand,accordingly,itwasdecidedto discontinuethisactivityandtowriteoffthegoodwillrelatingtheretointheamountofusd2.7million.management embarkedonstreamliningandre-engineeringitsoperatingprocessesaimingatfurtherreducingitsbreak-evenpoint computingsolutionsnowconcentratesonitscorecompetence,thedesignofhighlyeffectivestandardandcustomised solutionsfordataandvoicecommunication carlo gavazzi group

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corporate business units corporate governance consolidated financial statements financial statements letter to the shareholders review of operations group profile despitestableturnoverfromcontinuingoperations,thebusinessunitsucceededinturninglastyear soperatinglossinto ameaningfulprofit.in2007/08,computingsolutionswillleverageonthecloseandsuccessfulrelationswithitstier-one customersandmanagementisconfidenttowinadditional,alreadyidentifiedprogrammes.itbelievesthattheenacted andplannedoperationalimprovementsaswellastheidentifiednewbusinessopportunitieswillallowthebusinessunitto significantlystrengthenitsmarketpositionanditsfinancialperformance financial results operatingrevenuefromcontinuingoperationsincreasedbychf14.1millionoverthepreviousyear.asaresultof efficiencyimprovementprogrammes,economy-of-scaleeffectsandadifferentbusinessmix,grossprofitrosebychf8.8 milliontochf100.9million,representinganewrecordhighof46.7%ofsales.ebitofthereportingperiodincludes chf1.8millionnon-recurringlegalandseveranceexpensesaswellaslicenseincomewhilepreviousyear sebitbenefited fromthereversalofaccrualsofchf1.5million.despitethesedifferencestotallingchf3.3million,ebitimprovedby chf5.4millionor37 afterinterestchargesandcurrencyexchangelossesofchf1.2millionpreviousyearchf0.3 millionincomeearningsfromcontinuingoperationsimprovedbychf3.4millionfromchf11.5milliontochf14.9 million.afterthegoodwillwrite-off,thecompanyisreportinganetincomeofchf11.5million withanequityatmarch31,2007,amountingtochf99millionor54%oftotalassets,thegroup sbalancesheet continuestobesound.consideringthis,aswellasthestrongoperationalperformance,theboardofdirectorswillpropose totheannualshareholders meetingthepaymentofadividendofchf7perbearershareforthereportingperiod correspondingto33%ofearningsfromcontinuingoperations outlook carlogavazzibelievesthatthecompanieshavingthehighestsuccesspotentialarethosethatreactfasttothechanging environment,investheavilyinfuturetechnologiesandexploitfullytheeconomy-of-scaleeffects.thebasisforthegroup s futuresuccessremainsthehighservicelevelandcustomerorientation,thebroadrangeofgloballyacceptedstate-ofthe-artproducts,thejointdevelopmentofnewproductswithmarketsegmentleadersandtheever-increasingnumberof satisfiedcustomers.thegroupwillretainitsleanandefficientoperatingstructure withthecurrenteconomicconditionsprevailing,grouprevenueisexpectedtoagainexceedmarketgrowthand managementisconfidentinfurtherenhancingthegroup sprofitabilitysignificantly acknowledgements today,carlogavazziiswellpositionedintermsoffinancialstability,focusedstrategy,innovativetechnology,customer alliancesandmarketshareand,moreover,achievedthehighestearningseverfromcontinuingoperations.thegroup consistsofmanytalentedpeopleprovidingexceptionalperformance,rewardedbyattractivebonusschemesthathonour outstandingresults.carlogavazziisproudtohaveadedicatedteam,willingandabletofurtherstrengthenbothits financialanditsglobalmarketposition.manythanksandappreciationgototheemployeesfortheirdedicationand hardwork,toourcustomersandbusinesspartnersfortheirconfidenceandloyalty,aswellastoourshareholdersforthe continuedtrustinthemanagementandtheboardofdirectors werners.welti chairmanoftheboard 10 carlo gavazzi group

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corporate review of operations structure theorganisationalstructureofthegroupremained unchangedduringtheyearunderreview.thegroup iscomposedofthetwobusinessunitsautomation componentswithitsheadofficeinlainatemilan italy andcomputingsolutionswithitsheadofficeinbrockton ma,usa.duetothecancellationofthedistribution agreementforactivevoice-recognitionboardssolduntil march2007bychannelaccess,llc,thefulfilmentdivision ofthecomputingsolutionsbusinessunit,thisactivity hasbeendiscontinued.in2006/07,itsoperatingrevenue amountedtochf7.4millioncomparedwithchf14.9 millioninthepreviousyear discontinued operations underusgaap,thesaleorabandonmentofanentire activityresultsinthetransactionbeingtreatedas discontinuedoperations.thisimpliesthattheconsolidated incomestatementismadeupoftwoparts,anincome statementreflectingthefinancialperformanceofthe remainingbusinesscontinuingoperationsandan additionalpartbelowtheline«earningsfromcontinuing operations»reflectingthefinancialconsequencesof thesaleorabandonmentoftheactivitydiscontinued operations theincomestatementofthepreviousyear isrestatedinordertoallowfordirectcomparison.the balancesheetatmarch31,2007reflectstheassets liabilitiesandequityofthecontinuingoperationsonly whereasthepreviousyear sbalancesheethasnotbeen restated currencies asthegroupoperatesinmorethan20countriesand generatessubstantiallyallofitsrevenueincurrenciesother thantheswissfranc,foreignexchangeratemovementsare ofparticularimportance.comparedwiththeprevious year,theeurostrengthenedagainsttheswissfrancand theusdollarweakened.theweightedpositivecurrency effectforthegroupamountedto0.8%onbookingsand operatingrevenueand1.3%onoperatingexpenses.the currencyexposureforthegrouponprofitabilityislimited aslocalrevenuesarematchedwithcorrespondingexpenses inthesamecurrencies bookings and backlog in2006/07,consolidatedbookingsfromcontinuing operationsincreasedbychf19.8millionor9.8 8.9%adjustedforcurrencyeffectfromchf201.8 milliontochf221.6million.bookingsexceededrevenue bychf5.9millionforabook-to-billratioof103 the automationcomponentsbusinessunitincreasedits bookingsbychf19.8millionor11.5 9.6%adjusted forcurrencyeffectfromchf171.5milliontochf191.3 million.bookingsofthecomputingsolutionsbusinessunit fromcontinuingoperationsincreasedinusdollarsby 2.9%whereasinswissfrancstheyweremaintained atthesamelevelasthepreviousyearofchf30.3million grouporderbacklogatyear-endamountedto23.6 ofoperatingrevenue,correspondingtowork-on-hand ofalmostthreemonthscomparedwithtwoandahalf monthsinthepreviousyear operating revenue consolidatedrevenuefromcontinuingoperationsincreased bychf14.1millionor7.0 6.2%adjustedforcurrency effectfromchf201.6milliontochf215.7million theautomationcomponentsbusinessunitincreasedits revenuebychf15.6millionor9.1 7.2%adjustedfor currencyeffectfromchf171.0milliontochf186.6 million,reflectingthebenefitsgainedfromapplicationdrivenproductdevelopmentandthegeographical expansioninsouth-east-asia.revenuefromcontinuing operationsatcomputingsolutionsdecreasedinusdollars byusd0.5millionor2.1%andinswissfrancsbychf1.5 millionor4.9%fromchf30.6milliontochf29.1million automationcomponentsrepresented86.5%ofgroup revenuecomparedwith84.8%inthepreviousyear improved gross profit margin theconsolidatedgrossprofitmarginimprovedby1.0 percentagepointfrom45.7%to46.7%inthereporting period.intheautomationcomponentsbusinessunit,the grossprofitmarginincreasedby1.1percentagepointsfrom 49.5%to50.6%whileitdecreasedatcomputingsolutions from24.0%to21.9%duetoadifferentproductmix.the excellentmarginperformanceatautomationcomponents wasassistedbythelowercostsresultingfromthetransfer ofproductionfromdenmarktomaltaandlithuaniaand economy-of-scaleeffectsfromincreasedproduction 11 carlo gavazzi group

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corporate business units corporate governance consolidated financial statements financial statements letter to the shareholders review of operations group profile operating expenses operatingexpensesasapercentageofoperatingrevenue amountedto36.9%comparedwith38.9%intheprevious year.operatingexpenses,includingselling,general administrativeandr&dexpenses,increasedbychf1.2 millionor1.5 0.3%adjustedforcurrencyeffectfrom chf78.4milliontochf79.6million.theautomation componentsbusinessunitincreasedoperatingexpenses bychf3.1millionor4.6 2.7%adjustedforcurrency effectfromchf67.3milliontochf70.4million,reflecting theincreasedinvestmentinsales,marketingandr&d personnel.operatingexpensesofthecomputingsolutions businessunitwerereducedbychf1.9millionor17.1 23.3%adjustedforcurrencyeffectfromchf11.1million tochf9.2millionasaresultoftherestructuringefforts otherincome/expense,net,ofchf1.0millionincludes non-recurringrestructuringexpensestocoverthemove ofautomationcomponentsproductionfromdenmark andtherelocationofthecomputingsolutionsreno productiontobrockton,ma,usa,arbitrationlegalcosts plusthird-partylicenseincomeforanetcostofchf1.8 million.incontrast,thepreviousyearincludedincome fromaprovisionnolongerrequiredofchf1.5million.the netchangeofnon-recurringitemsamountedtochf3.3 million enhanced ebit consolidatedebitincreasedbychf5.4millionor 36.5%fromchf14.8milliontochf20.2million.as apercentageofoperatingrevenue,ebitamountedto 9.4 animprovementof2.1percentagepoints overthepreviousyear netinterestexpenseincreasedfromchf0.1millionto chf0.7million,mainlyduetothefinancingcostofthe chf24.9millionsharecapitalreductionmadeon october17,2006.in2006/07,therewasanexchange lossofchf0.5millioncomparedwithagainofchf0.4 millioninthepreviousyear,mainlyduetothedecreaseofthe usdollar.thenominaltaxrateimprovedby2.2%percentage pointsfrom23.8%to21.6 net income earningsfromcontinuingoperationsincreasedby chf3.4millionor29.6%fromchf11.5millionto chf14.9million.thelossandgoodwillwrite-offfrom discontinuanceofthecomputingsolutionsdistribution businessamountedtochf3.4millioncomparedwitha profitofchf0.6millioninthepreviousyear.netincome afterdeductingdiscontinuedoperationsamountedto chf11.5million.earningspersharefromcontinuing operationsgrewfromchf16.21tochf20.99.return onequityincreasedfrom10.9%to11.7%whilereturn oncapitalemployedimprovedfrom13.9%to19.1 balance sheet and cash flow tradeaccountsreceivable,net,increasedbychf2.3 millionor4.4%fromchf52.3milliontochf54.6 million,correspondingtoacollectionperiodof82days aslightincreaseoverthe80daysofthepreviousyear inventoriesincreasedbychf7.7milliontochf40.4 million,correspondingto3.3turnscomparedwith4.0 turnsinthepreviousyear.thistemporaryincreaseresulted fromthenecessitytoholdadditionalstocktocover customerrequirementsfollowingthetransferofproduction fromdenmarktomaltaandlithuania.networkingcapital increasedbychf6.4millionfromchf52.3millionto chf58.7millionforthesamereason.goodwilldecreased bychf4.1millionfromchf33.8milliontochf29.7 millionduetothewrite-offofgoodwillattachedtothe computingsolutionsdistributionbusinessofchannelaccess llc,ofchf3.3millionplustranslationdifferences netinterest-bearingdebtamountedtochf7.2million comparedwithanetcashpositionofchf5.1millionat theendofthepreviousyear shareholders equitydecreasedfromchf111.6million tochf98.9millionor54.3%oftotalassets,afterthenet incomeofchf11.5million,translationgainsofchf0.6 millionandthesharecapitalrepaymentofchf24.9million cashflowfromoperatingactivitiesbeforenetworking capitalchangesamountedtochf18.8million,anincrease ofchf3.3millionoverthepreviousyear.cashflow fromoperatingactivitiesincludingchangesinnetworking capitaldecreasedbychf7.6millionfromchf15.6million tochf8.0million,causedbytheinventoryincrease describedabove.takinginvestingactivitiesintoaccount freecashflowdecreasedbychf4.7millionfromchf17.5 milliontochf12.8million 12 carlo gavazzi group

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corporate group profile our mission carlogavazziisadiversified,internationallyactive electronicsgroupdesigning,manufacturingandmarketing electronicequipmenttargetedattheglobalmarketsof industrialautomationandinformationprocessing our structure undertheumbrellaofaholdingcompany,headquarteredin switzerland,carlogavazziisorganisedintwobusinessunits itisthefunctionoftheholdingcompanytoensure planninganddevelopmentofthegroup sbusinessportfolio chooseacoherentsetofstrategiesandobjectives monitortheirimplementationandtheefficiencyofthe correspondingmanagementtoolsandprocesses,select theupper-levelmanagement,managecorporatefinance controlling,taxplanning,managementinformation systems,communicationandinvestorrelations thebusinessunitsoperateseparatelywithintheframework ofdefinedstrategiesandobjectives;theyareresponsible forresearchanddevelopment,manufacturing,quality marketingandsales,humanresources,logistics,finance andcontrol.groupexecutivesleadtheirbusinessunits inlinewiththeholding sobjectivesasbusinessmenwith strongentrepreneurialdriveandresponsibility our objectives toprovideourcustomerswithtechnologicallyinnovative highqualityandcompetitivesolutions,incompliancewith theirrequirementsandexpectations tocreateanenvironmentconducivetoouremployees p rofessionalandpersonaldevelopment toobtainafairandequitablereturnforourshareholders throughsustaineddevelopmentofourcoreactivities our principles tocreateaddedvalueforourcustomerswithourproducts andservicesinordertostrengthentheirmarketpositions andestablishlong-termpartnerships toadaptstructuresandprocessestomarketneedsand d elegateresponsibility topromoteanenvironmentconducivetomutualrespect andcooperation tomarkclearleadershipandintegritybydoingwhatwesay our activities the automation components business unit designsandmanufactureselectroniccontrolcomponents fortheglobalindustrialautomationmarketsinitsiso 9001certifiedfactoriesinitaly,lithuania,maltaand thepeople srepublicofchina.theproductssensors monitoringrelays,timers,energymanagementsystems solid-staterelays,electronicmotorcontrollers,safety devicesandfieldbussystemsprovideautomationsolutions forthefactoryandbuildingautomationmarkets.typical customersareoriginalequipmentmanufacturersof packagingmachines,plastic-injectionmouldingmachines foodandbeveragesproduction,conveyingandmaterial handlingequipment,doorandentrancecontrolsystems liftsandescalatorsaswellasheating,ventilationandairconditioningdevices.value-addedresellersanddistributors areothereffectivechannelstothemarket.theproducts aremarketedacrosseurope,northamericaandasiapacificthroughanetworkof20ownsalescompaniesand throughmorethan40independentnationaldistributors inaddition,thebusinessunitdesignsandmanufactures signallingequipmentandsafetyrelaysfortheitalianstate railways the computing solutions business unit designs,manufacturesandmarketsintheusastandard andcustomproductssupportingopenarchitecturebus structuressuchasvme,compactpci,advancedtca compacttcaandmicrotcaaswellasswitchfabric technologies.theproductsincludeenclosuresandhighspeedbackplanes,fabricconnectivitysolutionsaswellas embeddedcomputersystems.theunit ssystemintegration expertiseprovidescustomerswithcomplete,fullytested andcertifiedsystems.thecomputingsolutionsbusiness unitoperatesaniso9001certifiedmanufacturing facilityontheeast-coastoftheusa.theunit smain customersaremanufacturersofcommercialandmilitary telecommunicationsequipment,mass-storageunitsfor dataprocessing,specialitycomputers,medicalequipment andsystemsforindustrialautomation 13 carlo gavazzi group

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corporate business units corporate governance consolidated financial statements financial statements letter to the shareholders review of operations group profile our strategy solution-packages for the vertical market segments automation components material handling food beverages packaging automatic doors elevators smart building plastic sensors product lines control devices solid-state switching devices fieldbus systems computing solutions hvac vertical market segments military vme technologies advancedtca compacttca microtca 14 carlo gavazzi group industrial telecom vertical market segments

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business units automation components continuing investments in sales and marketing personnel broader geographical coverage and favourable market conditions enabled automation components to expand bookings and operating revenue by 11.5 and 9.1 respectively dino masili groupexecutive asoperatingexpensesrosebyonly4.6 operatingprofit improvedby37.7%toreachchf24.1millionor12.9 ofrevenue completion of production relocation therelocationofthedanishmanufacturingoperationsto lithuaniaandmaltahasbeensuccessfullycompleted.the temporaryincreaseofsemi-finishedandfinishedproducts assistedthebusinessunitinlimitingsupplyconstraintsthat arenormallyexperiencedduringproductiontransfers.the relatedrestructuringexpensesofchf1.3millionwerefully chargedtotheincomestatementinthereportingperiod growth in regions and in core products theexpansionstrategyinsouth-east-asiacontinuesto payoff.whilerevenueintheregionincreasedby 24 thesalesorganisationestablishedinmainlandchina twoyearsagoexpandedsalesby119 startingfroma lowlevel,salesineasterneurope,particularlyinpolandand theczechrepublic,increasedoverthepreviousyearby 60 revenuefromcoreproductlinessuchassolid-state switchingdevicesandmonitoringrelaysgrewbymore than15 toppedonlybyenergymanagementdevices whichincreasedinexcessof30 contrarytothis,sales ofnon-strategicproductsanddedicatedelectromechanical safetyrelaysandsignallingdevicesforstaterailways slightlydeclined many innovative and promising products withthetargettoprovidetheprioritymarketsegment customerswithafullpackageofapplication-oriented products,automationcomponentsdesignedand introducedanewrangeofenergyanalysersandenergy meters.inlinewithneweudirectivesforpublicbuildings theseproductspermitcustomerstoindividuallymonitor andcontrolenergyconsumption,therebyachieving importantenergysavings.mostofthesedevices incorporatestandardinterfacestointerconnectwith buildingcontrolsystems.furthermore,tobenefitfrom theongoingintroductionofnewsafetyregulationsin mostpartsoftheworld,thebusinessunitlauncheda numberofrelateddevicessuchassafetymodules,safety light-curtainsandasafetyversionoftheproprietary dupline®fieldbus outlook managementisconfidentthattheaccessiblemarket potentialforautomationcomponentswillcontinuetogrow in2007/08atthecurrentrateestimatedat4 instead demandforsafetyrelaysandsignallingdevicesfromstate railwaysmaydeclinefurtherinthecurrentfinancialyear thebroadstate-of-the-artproductline,theglobalmarket presenceandthecost-efficientmanufacturingoperations shouldallowthebusinessunittoagainoutgrowmarket demandandtofurtherimproveprofitability financial results chf million 2006/07 191.3 186.6 24.1 2005/06 171.5 171.0 17.5 11.5 9.1 37.7 bookings operatingrevenue operatingprofit 15 carlo gavazzi group

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