Elma Electronic : Executive Report 2020 (PDF)

EXECUTIVE REPORT 2020

ELMA - Your Solution Partner

Elma Electronic is a global manufacturer of electronic packaging products for the embedded systems market - from components, backplanes, power supply solutions, storage boards and chassis platforms to fully integrated systems. Elma is listed at the Swiss Stock Exchange, with subsidiaries in 10 countries on 3 conti-nents. To ensure our integrated solutions are optimized to our customers' needs, Elma partners with leading board manufacturers in the industry.

Elma also provides enclosure solutions and rotary switches for demanding applications for electronic com- panies. The company has a broad base of proven standard products which can be tailored to individual applications: Elma offers services from the initial concept to volume production. Elma's reliable solutions, flexibility, and design expertise are key reasons why the leading companies in the world choose Elma time and again.

Key Figures 2020

Elma Group Key Figures

in CHF 1,000	2020	2019
Order income	153,288	158,994
Net sales	147,036	151,155
EBITDA	9,939	9,552
in % of net sales	6.8	6.3
EBIT	6,555	6,408
in % of net sales	4.5	4.2
Net profit	5,584	5,111
in % of net sales	3.8	3.4
in % of average equity	13.5	13.5
Cash Flow from operating activities	10,326	7,774
Balance sheet total	91,803	94,070
Shareholders' equity	42,591	40,071
in % of balance sheet total	46.4	42.6
Headcount year end in FTE (incl. temporary employees)	778	773

The Alternative Performance Measures are described on page 27 of this Executive Report or on Elma's website at the following link:www.elma.com/en/investors/company-profile/alternative-measures

Net sales by region

Net sales by product line

in CHF and %

in CHF and %

778

147.0

million CHF net sales

5.6

million CHF net profit

employees worldwide

153.3

million CHF order income

Content

• 2 Letter to Shareholders

• 7 Strategy of the Elma Group

• 8 Interview with CEO

• 10 Product Lines

• 11 Highlights

• 12 Customer Projects

• 16 Regions

• 18 Financial Reports

• 18 Consolidated Balance Sheet Elma Group

• 20 Consolidated Income Statement Elma Group

• 21 Consolidated Cash Flow Statement Elma Group

• 22 Balance Sheet Elma Electronic AG, Switzerland

• 24 Income Statement Elma Electronic AG, Switzerland

• 25 Appropriation of Retained Earnings

• 26 Multi-year Overview Elma Group

• 27 Alternative Performance Measures

• 28 Group Companies

• 29 Imprint

Dear Shareholders,

The year 2020 was impacted by the global Covid-19 pandemic which posed considerable challenges for companies. In this economically and entrepreneurially demanding environment, the Elma Group succeeded in slightly increasing order income as well as net sales adjusted for cur-rency effects, improving profitability, and closing the financial year with a slightly higher net profit than last year.

Market trends

Elma's performance in 2020 was strongly influ-enced by the ongoing Covid-19 pandemic. Our customers reduced their capacities during the lockdowns ordered by their respective govern-ments. We had to adjust our production capacities accordingly and introduced short-time work in some cases. Covid-19 vaccines are now available and a return to the "new normal" seems to be slowly coming into view. The stimulative policies

-	Order income of CHF 153.3 million increased	by governments as well as the catch-up demand
by 0.7% adjusted for currency effects (pre­	among consumers and the execution of postponed
vious year: CHF 159.0 million)	projects by companies support the economic
-	Net sales of CHF 147.0 million 1.5% higher	recovery phase.
adjusted for currency effects (previous year:
CHF 151.2 million)	Innovation, research and development
-	EBIT of CHF 6.6 million (previous year: CHF	We offer solutions from components to integrated
6.4 million) and net profit of CHF 5.6 million	systems. Innovation is one of the key success fac-
(previous year: CHF 5.1 million) improved	tors for us to deliver market-driven products to our
due to significantly lower sales and other	customers and to ensure profitable growth in all
operating expenses	three regions and product lines. We work closely
-	All three regions with a positive profit contri­	with our customers when developing new products,
bution	system solutions and services. This enables us to
-	Operating cash flow increased by nearly 25%	understand the customer's needs when developing
to CHF 10.3 million	customized, innovative solutions. We are "Your
-	Net debts reduced by CHF 7.1 million to	Solution Partner".
CHF 16.9 million (previous year: CHF 24.0
million)	In the USA, we received five Military & Aerospace
-	Equity ratio improved to 46.4% (December	Engineering Technology Innovation Awards. This is
31, 2019: CHF 42.6%)	the fourth year in a row that Elma products have
-	A high level of innovation with significant	been selected by this important awards program.
product developments for the healthcare	Honorees of the Technology Innovation Awards
sector and five Technology Innovation	have made a pioneering contribution to the de-
Awards received	fense and aerospace industry and are recognized
as leaders with innovative solutions and products.
2	Executive Report 2020 Elma Group

Awarded products include the new power system "RP24" for the use in rugged terrain, the "VITA 48.4" liquid flow-through rugged ATR platform for the Defense and Aerospace electronic, the "ComSys 5371" rugged COMe system platform for high per-formance computing as well as the rugged platform for high performance AI applications "JetSys 5320". More information is available at https://www.elma. com/de/who-we-are/awards.

On pages 12 to 15 of this executive report, we show two innovative and demanding customer projects that include an application in the healthcare sector to contain in the Covid-19 pandemic

Order income

Demand from customers in the defense segment remained lively and made a significant contribution to the overall positive development in order in-come. Order income closed at CHF 153.3 million (previous year: CHF 159.0 million), which is a de- crease of 3.6%; however, adjusted for currency effects, a slight plus of 0.7% compared with the previous year was achieved. Orders are recorded as order income only if delivery is affected within the next six months.

In the USA, Elma received five Military & Aerospace Engineering Technology Innovation Awards. This is the fourth year in a row that Elma products have been selected by this important awards program.

Order income developed particularly well in the Asia region and went up 12.4% to CHF 11.8 million; adjusted for currency effects, they even rose by 19.3%. The Americas region increased order income in local currency by 2% to USD 82.0 million; in Swiss Francs, however, there was a decline of 3.9%. In the Europe region, orders income fell by 5.7% to CHF 64.7 million; adjusted for currency effects, the decrease was 3.6%. Orders in Germany and France developed positively with an increase compared with the previous year. The entities in Switzerland, UK and Israel were confronted with a pronounced slowdown, which led to lower order income.

Net sales

Production in 2020 was maintained as well as pos-sible in compliance with strict protective measures. Despite the postponements of orders by customers as a result of the Covid-19 pandemic, the consoli-dated revenue in local currency slightly increased. Short-term orders were executed to fill capacity. In the US, which is strongly driven by the systems business, net sales grew by 3%. Also the Asia region reported an increased demand, while activi-ties in the Europe region were hampered by the weaker economic dynamics and the related project delays in Germany, France and the UK.

In 2020, the Elma Group realized net sales total-ing CHF 147.0 million (previous year: CHF 151.2 million), which corresponds to a decrease of 2.7%; adjusted for currency effects, net sales rose by 1.5%. The Americas region increased net sales by 3.0% to USD 73.5 million (previous year: USD 71.3 million); in Swiss Francs they were down 2.9%. In the Europe region, net sales fell by 6.8% to CHF 65.9 million (previous year: CHF 70.7 million); ad-justed for currency effects, the decrease was 4.8%. In the Asia region, net sales increased by 28.8% to CHF 12.4 million (previous year: CHF 9.6 million); adjusted for currency effects, the growth was even 36.7%.

Despite the postponements of orders by customers as a result of the Covid­19 pandemic, the consolidated revenue in local currency slightly increased. Short­term orders were executed to fill capacity.

The System Solutions product line closed the 2020 business year with sales on previous year's level, thanks to the successful project business in the USA and Asia, which compensated for the decline in demand in Europe. The net sales amounted to CHF 108.8 million (previous year: CHF 108.5 mil-lion); adjusted for currency effects, an increase of 4.9% was achieved. The Enclosures & Components product line generated net sales of CHF 26.2 mil-lion (previous year: CHF 29.7 million), which is a minus of 11.7%; adjusted for currency effects, sales fell by 8.5%. The Rotary Switches product line achieved sales of CHF 12.0 million, a drop of 7.5% (previous year: CHF 13.0 million); adjusted for cur-rency effects, the decrease was 4.3%.

EBIT and net profit

The Elma Group closed the 2020 business year with a net profit of CHF 5.6 million (previous year: CHF 5.1 million). EBITDA reached CHF 9.9 million or 6.8% (previous year: CHF 9.6 million or 6.3%) and EBIT was CHF 6.6 or 4.5% (previous year: CHF 6.4 million or 4.2%). The profit per share amount-ed to CHF 24.44 (previous year: CHF 22.37). The improved profitability is due to the fact that sales and other operating expenses were significantly lower than in the previous year.

Solid balance sheet

As of December 31, 2020, the Elma Group reported total assets of CHF 91.8 million (previous year: CHF 94.1 million). The equity ratio stood at 46.4% (pre-vious year: 42.6%). Net debts fell by CHF 7.1 mil-lion to CHF 16.9 million (previous year: CHF 24.0 million).

Operating cash flow

The operating cash flow amounted to CHF 10.3 mil-lion and thus was CHF 2.6 million above previous year (previous year: CHF 7.7 million). This good re-sult made allowed to finance all investments by own funds, to repay bank debts in the amount of CHF 3.7 million and to increase cash by CHF 3.4 million. The strong operating cash flow was possible due to a higher net profit, lower stocks and reduced accounts receivable, trade and other liabilities.

Dividend policy	Change of Board of Directors and Group Manage­
Elma's dividend policy depends on the following	ment in 2020
factors:	In April 2020, Fred Ruegg has retired and stepped
down from his position as CEO of the Elma Group.

• - Improved balance sheet structure

• - Reduced net debts

• - Equity ratio of over 50%

We have made further progress in the last year to allow a dividend payment. Not all factors have been met yet and the Board of Directors will propose to the General Annual Meeting on April 15, 2021 to fore-go a dividend payment for 2020 and to continue to invest the generated funds into the company.

Investments

The investments goals in 2020 focused on increas-ing automation, digitization as well as on optimiz-ing productivity. Overall, investments in the amount of CHF 3.2 million were made in all regions. 54% of the investments were made in the Europe region, 42% in the Americas region and 4% in the Asia region. In the previous year, the investment volume was CHF 14.2 million, mainly due to the purchase of an industrial campus in the USA.

Employees

The headcount of the Elma Group including tempo-rary employees rose slightly to 778 employees (FTE) at the end of 2020 (previous year: 773 FTE). We employed a total of 404 people in the Europe region (previous year: 424), followed by the Americas region with 298 employees (previous year: 277) and the Asia region with 76 employees (previous year: 72).

The Annual General Meeting on April 16, 2020 has elected him to the Board of Directors, preserving his many years of industry experience and high level of expertise for the Elma Group. Thomas Herrmann was appointed by the Board of Directors as the new CEO of the Elma Group and member of the Group Management as per April 17, 2020.

Change of Board of Directors in 2021

Rudolf W. Weber has been a non-executive member of the Board of Directors since 2004. In 2020, he reached the age limit stipulated in Elma's by-laws. He will therefore resign from the Board of Directors after the completion of the Annual General Meeting on April 15, 2021. The Board of Directors has decided in its meeting on February 25, 2021 that the position will not be replaced for the time being and thus the Board will consist of four members after the 2021 Annual General Meeting. The entire Board of Directors thanks Rudolf W. Weber for his successful work of many years and his great contri-bution to the Elma Group as a member of the Board of Directors and Chairman of the Compensation Committee.

The investments goals in 2020 focused on increasing automation, digitization as well as on optimizing productivity.

We started the 2021 business year with a solid order backlog.

The other four members of the Board of Directors will stand for re-election at the Annual General Meeting. The Board of Directors will propose to the Annual General Meeting on April 15, 2021 to re-elect all members as well as re-elect Martin Wipfli as Chairman. In addition, the Board of Directors will propose to the 2021 Annual General Meeting to elect Fred Ruegg and to re-elect Peter Hotz as members of the Compensation Committee.

Annual General Meeting 2021

Based on Art. 27 of Ordinance 3 of the Federal Council on measures to combat the coronavirus (COVID-19) of June 19, 2020 (in the version of February 8, 2021), the Elma Board of Directors de-cided to conduct the Annual General Meeting 2021 without the physical presence of the shareholders. For the upcoming Annual General Meeting on April 15, 2021, the shareholders will have the opportuni-ty to vote and provide instructions to the inde-pendent proxy, either in writing or electronically via the online platform of Share Comm Service AG (shareholder's register). Details regarding voting and instructions to the independent proxy for the 2021 Annual General Meeting will be explained in the invitation to the General Meeting.

Outlook

We started the 2021 business year with a solid or- der backlog. The further development of the Covid-19 pandemic and its effects on the global economy remain unpredictable from today's per-spective. For this reason, we refrain from providing an outlook for 2021.

Special thanks

The year 2020 was very demanding for all of us and presented each of us with new challenges. The Board of Directors and the Group Management would therefore like to take the opportunity to thank all employees of the Elma Group for their great commitment in these difficult times. A big thank you also goes to our customers and business partners for their trust in the Elma Group despite being confronted with the challenges of the pan-demic. We would like to thank our shareholders for their loyal support in a challenging year.

Martin Wipfli Chairman

Thomas Herrmann CEO

Strategy of the Elma Group

Elma - Your Solution Partner. This claim is recog- With production sites in the three nized worldwide as Elma offers products and ser- regions, Elma can quickly respond to

vices of three strategic product lines through ten local Group companies, spread across the regions Americas, Europe and Asia. Elma aims to improve results significantly in the medium term and achieve an organic growth each year. Through se-lective acquisitions Elma exploits additional growth potential.

Elma's corporate strategy focuses on four key ele-ments:

Expand market share

Elma intensifies market activities and develops strategies to win more customers in new market segments for their three strategic product lines System Solutions, Enclosures & Components and Rotary Switches.

Sell all product lines in three regions

Elma's system solutions are based on the compo-nent business. Elma sells their products through their regional subsidiaries, strategic partners and distributors worldwide.

Regional production

With production sites in the three regions, Elma can quickly respond to the needs of customers. In addition, they provide extensive protection against the consequences of significant currency fluctua-tions ("natural hedging").

the needs of customers.

Develop and expand the systems business and expand the customer base and design­ins for the Rotary Switches business

Elma focuses on advanced technical components and system solutions and on expanding the system integration business in all three regions. Elma ex-pands their product range with small form factor products in electronic packaging. In the Rotary Switches product line, Elma supplements business activities and solutions with human-machine inter-face applications.

Thomas Herrmann on his first year as CEO of the Elma Group

Mr. Herrmann, you were appointed CEO of the Elma Group in April 2020, in the midst of the Covid­19 pandemic. You had to familiarize your­self with your new role while at the same time lead through the worst economic crisis in decades. How did you deal with this?

First of all, I was impressed by how the employees of the Elma Group worldwide mastered the great challenges associated with the Covid-19 pandemic. Good protective measures were introduced, and have been continuously adapted and improved amongst all Elma companies.

My start was of course extremely unusual, espe-cially since the planned visits to our companies and customers in Europe, USA and Asia could not take place physically. We compensated for this through many virtual meetings and digitalIn another example, we were able to develop and manufacture a disinfection device for a customer in Switzerland, which was also used in the Zurich region in Switzerland to disinfect buses, laborato-ries and medical practices.

You described the 2020 business year as "turbulent" but also "solid". Are you satisfied with the performance in the context of the Covid­19 pandemic?

Our results are indeed presentable. We slightly increased net sales and order income adjusted for currency effects. At the same time, we reduced operating expenses and generated a higher EBIT and net profit.

I am very proud that we were able

company tours, which quickly gave me a first im- to make an important contribution to pression of the strengths of the various locations, the public healthcare in 2020 with

and also some weaknesses. Interestingly, the virtual medium has enormously strengthened and accelerated the global dialogue. Nevertheless, I am looking forward to meeting our customers and em-ployees in person soon.

In your opinion, which positive experiences and developments were particularly significant?

I am very proud that we were able to make an im-portant contribution to the public healthcare in 2020 with our technologies, our products and our agility. We were able to supply a large number of rotary switches for ventilator machines in the med-ical sector at short notice; this was a major contri-bution to ensuring that hospitals in Europe and Southeast Asia have received the essential equip-ment.

our technologies, our products and our agility.

Our customers have remained loyal to us, the defense sector has proven to be stable and the de-cline in orders in the industrial sector was largely compensated by the medical and transportation sectors. I am convinced that global companies sur-vive when they operate with agility and customer orientation in this "new normal" environment. I am motivated every day to strengthen the global team approach and the know-how transfer between the companies of the Elma Group as well as related solutions for additional customer segments.

Will the pandemic change the global industrial landscape and technological development per­manently?

I am convinced that digitization will radically change companies, economics, politics and society.

It is the very foundation for future commercial success. Digitization and networking offer great opportunities, yet but they also present us with challenges. At Elma, we continued to invest in digi-tization in 2020, and also in automation and pro-ductivity optimization. This applies to all areas - from production to engineering, communication and administration.

How do you recover from your demanding job as CEO, especially during a pandemic?

I believe I have a special hobby: during the summer months, I am a passionate beekeeper, looking after my bee colonies. I also enjoy engaging in sports with my family; I love skiing in winter and biking in summer. On rainy days, I live out my creative side by painting and sculpting.

I am motivated every day to strengthen the global team approach and the know­how transfer between the companies of the Elma Group as well as related solutions for additional customer segments.

Thomas Herrmann is 49 years old, married, with two children. He holds a mechanical engineering degree from from the ETH Zurich (Switzerland), with an Executive MBA from the University of St. Gallen (Switzerland) and University of Toronto (Canada).

He has held various management positions with Alstom Power and GE Power over the last several years, his last position there as General Manager of Industrial Steam Turbines at GE Power.

Product Lines

System Solutions

Elma develops and manufactures advanced and in-tegrated system solutions for demanding applica-tions and environments. As a leading provider of fully integrated solutions for "embedded systems", Elma supports customers with global engineering teams and production sites. In 2020, Elma success-fully implemented new innovative customer pro-jects in the system business.

Elma has enforced its virtual medium for the global dialog with customers and partners. As a driving force in technological committees, Elma has organized and sponsored a series of webcasts aimed at understanding the technical Sensor Open System Architecture Standard (SOSA). The SOSA consortium enables governments and industry to collaboratively develop open standards and best practices to enable, enhance and accelerate the deployment of affordable, capable and interopera-ble sensor systems. One of the main focuses was explaining why network connections are essential for module compatibility and successful implemen-tation at the system level. The webinars were re-ceived with great international interest. Elma plans to enhance this medium for more technology semi-nars for system applications.

Enclosures & Components

The Enclosures & Components product line focuses on the implementation of customized require-ments and projects in order to meet the individual needs of customers for integrated products.

By using the new 3D configurator, Elma's premium enclosures can be configured online. The software allows customers to autonomously configure the housing according to their requirements, download product model data and add a customized front or rear panel. The configurator is currently available on Elma's website for the products "Stylebox 15 e-motion", "Guardbox 33" and "Compact Case 20"; more products are constantly being added.

Rotary Switches

The rotary switch portfolio offers customers exten-sive and high-quality deployment solutions. The proven switch applications used by customers are testimony to Elma's success story with selector switches, coded switches and encoders. Among oth-ers, they are used in the medical and rescue technol-ogy, for safety and telecommunication applications as well in the defense sector.

Innovation is one of Elma's the most important suc-cess factors. Elma works closely with customers and technology partners to deliver products, solu-tions and services that meet the needs of the mar-ket. Among other activities, the degree of automa-tion at our locations was increased in order to make use of the opportunities that "Industry 4.0" offers for efficient production, traceability and other important aspects. In 2020, the automation modules for the encoder lines "E18" and "E33" were expanded. By combining the two switch fam-ilies, production is additionally designed for higher volumes. On the other hand, the industrialization of the "X1" switch family with four automation modules started. Elma invested almost CHF 1 mil-lion in automation in 2020.

Highlights 2020

Innovation Awards

In the USA, Elma received five Military & Aerospace Engineering Technology Innovation Awards. This is the fourth year in a row that Elma products have been selected by this important awards program. Honorees of the Technology Innovation Awards have made a pioneering contribution to the defense and aerospace industry and are recognized as leaders with innovative solutions and products. Awarded products include the new power system "RP24" for the use in rugged terrain, the "VITA 48.4" liquid flow-through rugged ATR platform for the Defense and Aerospace electronic, the "ComSys 5371" rugged COMe system platform for high per-formance computing as well as the rugged platform for high performance AI applications "JetSys 5320". More information is available at https://www.elma. com/de/who-we-are/awards.

New Online Product Configurator for Enclosures By using the new 3D configurator, Elma's premium enclosures can be configured online. The software allows customers to autonomously configure the housing according to their requirements, download product model data and add a customized front or rear panel.

The configurator is currently available on Elma's website for the products "Stylebox 15 e-motion", "Guardbox 33" and "Compact Case 20"; more products are constantly being added. Link: www. elma.com/en/products/enclosures-and-components

Automation

The degree of automation at our locations was in-creased in order to make use of the opportunities that "Industry 4.0" offers for efficient production, traceability and other important aspects. In 2020, the automation modules for the encoder lines "E18" and "E33" were expanded. By combining the two switch families, production is additionally de-signed for higher volumes. On the other hand, the industrialization of the "X1" switch family with four automation modules started.

Securing Health

©SteinemannDisinfection

Steinemann Disinfection is a specialist in the inter-national disinfection market and offers sustaina-ble, reproducible and efficient concepts, processes and systems for the three-dimensional disinfection of rooms and surfaces. They design processes to control, viruses, and fungi public and industrial institutions as well as in private households, using equipment, chemicals or natural substances. They also specialized on the mediation and dissemina-tion of methods, processes and best practice pro-grams at all levels and in all defined applications.

Elma produces for the customer a cold mist disper-sion devise, the "CleanCube", which independently frees rooms and surfaces from viruses and bacte-ria using a 3D process. The device swirls disinfect-ant evenly indoors using a powerful vortex and does not leave out any spots. Elma was able to in-dustrialize this complex disinfection device within a short period of time and thus makes an important contribution to containing the Covid-19 pandemic.

www.steinemann-disinfection.ch

Redefining Audio Experience

©AryaAudioLabs

Arya Audio Labs is a London based designer and manufacturer of high-end audio equipment. Their team is taking on the challenge to redefine the audio experience and setting a new standard in audio reproduction.

The AirBlade HYPE is Arya Audio's latest creation and a one-of-a-kind product in the high-end audio market. It is used as an add-on unit to augment tra-ditional loudspeaker systems with its unique 180-degree dispersion while covering a much wider frequency range than a typical driver. The ul-tra-wide dispersion achieves true immersive sound by extending the optimal listening position far be-yond a single sweet spot. AirBlade HYPE is fully pas-sive and does not require additional amplification.

Arya Audio Labs has chosen Elma's Rotary Selector Switch Type 04 for its superb quality and customi-sation options. With its gold-plated copper alloy pins, the ceramic body and the adjustable stop po-sitions, the Elma Type 04 is the logical choice for state-of-the-art products like the AirBlade HYPE.

www.arya-audio.com

Regions

Americas

With the two operating companies Elma Electronic Inc. and Optima Stantron Corp. as well as several sales, engineering and production locations, the Americas region offers customers services along the entire value chain of the Elma Group.

Europe

In the Europe region, Elma is represented by six group companies: in Switzerland, Germany, UK, France, Romania and Israel. The regional produc-tion site in Romania ensures the supply of the re-gion with rotary switches as well as enclosures and components.

Demand from customers in the defense segment in 2020 remained stable and made a significant con-tribution to the overall positive development. The Due to the promptly implemented US companies specialize in the implementation of measures, Elma was able to soften

technically demanding system solutions and have further increased order income and net sales, both in local currency.

the impact of the ongoing pan­demic in the Europe region, and all companies made a positive

In 2020, Elma Americas received five Military & profit contribution to Elma's over­ Aerospace Engineering Technology Innovation all performance.

Awards. Honorees of the Technology Innovation

Awards have made a pioneering contribution to the

defense and aerospace industry and are recog-nized as leaders with innovative solutions and products. Awarded products include the new power system "RP24" for the use in rugged terrain.

The US companies specialize in the implementation of technically demanding system solutions and have further increased order income and net sales, both in local currency.

The global Covid-19 pandemic has had the biggest impact on business in Europe. Activities in the Europe region flattened out as a result of the economic slowdown. Due to the promptly imple-mented measures, Elma was able to soften the impact of the ongoing pandemic in the Europe region, and all companies made a positive profit contribution to Elma's overall performance. In the production site in Romania, the automation concept was further advanced with focus on the Rotary Switches product line.

Asia

Elma is represented in Asia with subsidiaries in China, Singapore as well as a Design Center in India, specializing in sophisticated electronic de-sign and software solutions. By using the in-house capabilities at the production site in Shanghai, customers in Asia are offered a wide range of housings in the highest Elma Quality.

Business activities in China resumed earlier than in other regions when the restrictions of the Corona pandemic were partly lifted. There was increased demand, especially in Southeast Asia, because of the successful project business for demanding system solutions. In the Asia region, order income and net sales improved significantly, both in local currency and as adjusted for curren-cy effects.

Elma China has received certification for the rail industry. The electronic control cabinets were suc-cessfully tested for shock and vibration in accor- dance with IEC61373-2010. The cabinets are mainly used in signaling control systems in vehicle cockpits on board or on the track side.

There was increased demand, especially in Southeast Asia, because of the successful project business for demanding system solutions.

at December 31

Assets

2020	2019
Cash	10,619	7,223
Trade accounts receivable	20,820	23,285
Other short-term accounts receivable	1,126	1,515
Inventories	30,545	32,040
Prepayments and accrued income	1,254	1,121
Total current assets	64,364	65,184
Non­current assets
Tangible assets	23,426	26,131
Deferred tax assets	2,339	2,433
Other financial assets	172	190
Intangible assets	1,502	132
Total non­current assets	27,439	28,886
Total assets	91,803	94,070
18

in CHF 1,000

at December 31

Liabilities and equity

2020	2019
Short-term bank debts	6,716	8,158
Trade accounts payable	9,388	10,974
Other current liabilities	4,173	3,846
Short-term provisions	2,605	2,580
Accrued liabilities and deferred income	4,507	4,644
Total current liabilities	27,389	30,202
Non­current liabilities
Long-term bank debts	10,786	13,051
Subordinated loan	10,000	10,000
Other long-term liabilities	25	10
Deferred tax liabilities	429	307
Long-term provisions	583	429
Total non­current liabilities	21,823	23,797
Total liabilities	49,212	53,999
Equity
Share capital	2,513	2,513
Capital reserves	8,388	8,388
Retained earnings	31,690	29,170
Total equity	42,591	40,071
Total liabilities and equity	91,803	94,070
19

in CHF 1,000

Consolidated Income Statement Elma Group

in CHF 1,000	2020	2019
Net sales from goods and services	147,036	151,155
Cost of goods sold	-108,335	-110,356
Gross profit	38,701	40,799
Sales and Marketing expenses	-18,351	-19,992
Administrative expenses	-11,088	-10,993
Research and development expenses	-2,297	-2,454
Other operating income	846	954
Other operating expenses	-1,256	-1,906
Operating income (EBIT)	6,555	6,408
Financial result	-553	-620
Ordinary result	6,002	5,788
Non-operating result	399	176
Profit before income taxes (EBT)	6,401	5,964
Income taxes	-817	-853
Net profit	5,584	5,111
Net profit per share in CHF	24.44	22.37
20

Consolidated Cash Flow Statement Elma Group

January 1 to December 31

in CHF 1,000

Cash flow from operating activities Net profit

Income taxes Financial result Adjustments for

Depreciation of tangible assets Amortization of intangible assets Change in provisions

Net profit from disposal of tangible assets Other non-cash-effective income and expenses Changes in net working capital

Inventories

Trade accounts receivable

Other short-term accounts receivable and prepaid expenses Trade accounts payable

Other short-term payables and accruals

Income taxes paid

Interest expenses paid (net)

2020 2019

Total cash flow from operating activities 7,738

Cash flow from investing activities

Purchase of tangible assets Disposal of tangible assets Purchase of intangible assets Changes of other financial assets

Total cash flow from investing activities

Cash flow from financing activities Issuance of short-term bank debts Repayment of short-term bank debts Issuance of long-term bank debts Repayment of long-term bank debts Total cash flow from financing activities

Effects of exchange rate on cash

Increase in cash

Cash at January 1

5,584 5,111

817 853

553 620

3,258 3,057

126 87

330 -180

-11 -36

1 6

151 -2,267

1,351 446

190 -142

-1,355 616

196 738

-300 -551

-565 -620 10,326

-14,175

18 36

-1,200 -44

12 13

-2,919 -14,170

- 5,209

-3,733 -2,943

8,500 4,571

-

-3,713 6,837

Cash at December 31 7,223

7,223 6,905

-298 -87

3,396 318

10,619

at December 31

Assets

in CHF 1,000	2020	2019
Current assets
Cash	3,281	1,194
Trade accounts receivable
- Group companies	2,963	2,926
- Third parties	3,016	3,217
Other accounts receivable
- Group companies	3,614	2,891
- Third parties	416	736
Inventories	10,406	11,392
Prepayments and accrued income	360	243
Total current assets	24,056	22,599
Non­current assets
Financial assets
- Investments	20,155	20,405
- Loans to Group companies	1,977	6,848
- Other financial assets	10	10
Tangible assets	9,183	9,683
Intangible assets	132	62
Total non­current assets	31,457	37,008
Total assets	55,513	59,607
22

at December 31

Liabilities and equity

in CHF 1,000	2020	2019
Liabilities
Current liabilities
Short-term interest-bearing liabilities	6,716	7,886
Trade accounts payable:
- Group companies	572	379
- Third parties	1,817	3,143
Other current liabilities:
- Group companies	4	77
- Third parties	215	479
Accrued liabilities and deferred income	1,434	1,364
Total current liabilities	10,758	13,328
Non­current liabilities
Non-current interest-bearing liabilities
- Bank debts	10,786	13,051
- Subordinated loan	10,000	10,000
Provisions	24	10
Total non­current liabilities	20,810	23,061
Total liabilities	31,568	36,389
Equity
Share capital	2,513	2,513
Legal reserves
- Capital reserves	7,311	7,311
- Retained earnings	1,077	1,077
Free reserves	5,899	5,899
Retained earnings	7,145	6,418
Total equity	23,945	23,218
Total liabilities and equity	55,513	59,607
23

Income Statement Elma Electronic AG, Switzerland

2020	2019
41,613	43,755
2,745	2,019
44,358	45,774
Material expenses	-25,745	-27,048
Personnel expenses	-12,686	-13,421
Other operating expenses	-3,895	-3,908
Depreciation	-1,199	-1,103
Other operating income	294	343
Gain from disposal of fixed assets	12	7
Operating income (EBIT)	1,139	644
Financial income	183	235
Financial expenses	-532	-588
Revaluation on investments	-250	1,105
Ordinary result	540	1,396
Non-operating result	240	223
Net profit before taxes (EBT)	780	1,619
Taxes	-53	-27
Net profit	727	1,592
24

in CHF 1,000

Appropriation of Retained Earnings

Retained earnings

2020	2019
on April 15, 2021 as follows:	in CHF 1,000	in CHF 1,000
Retained earnings carried forward from previous year	6,418	4,826
Net profit	727	1,592
Retained earnings	7,145	6,418
Proposal of the Board of Directors
for the appropriation of retained earnings	2020	2019
Proposal of the	Proposal of the
Board of Directors	Board of Directors
in CHF 1,000	in CHF 1,000
To be carried forward	7,145	6,418
Retained earnings	7,145	6,418
25

Retained earnings will be proposed to the Annual General Meeting

Multi­year Overview Elma Group

2020	2019	2018	2017	2016
Order income	153,288	158,994	148,626	143,201	144,777
Net sales	147,036	151,155	145,981	143,978	130,308
EBITDA	9,938	9,552	10,221	9,687	6,369
EBITA	6,555	6,408	7,236	6,951	3,525
EBIT	6,555	6,408	7,236	6,951	3,525
Net profit	5,584	5,111	5,613	3,009	2,335
in % of average equity (ROE)	13.5	13.5	16.9	10.3	8.8
Depreciation of tangible assets	3,258	3,057	2,780	2,517	2,563
Amortization of intangible assets	126	87	204	219	281
Investments in tangible assets	1,872	14,175	2,448	3,166	3,078
Investments in intangible assets	1,348	44	1	86	138
Cash flow from operating activities	10,326	7,774	5,713	4,815	-1,063
Cash flow from investment activities	-2,919	-14,206	-2,393	-3,186	-3,179
Free cash flow	7,407	-6,432	3,320	1,629	-4,242
Cash flow from financing activities	-3,713	6,837	-3,823	911	1,619
Non-current assets	27,439	28,886	18,387	19,395	19,923
thereof tangible assets	23,426	26,131	15,469	15,908	15,208
Current assets	64,364	65,184	63,445	66,164	56,865
thereof cash and cash equivalents	10,619	7,223	6,905	7,416	4,874
Balance sheet total	91,803	94,070	81,832	85,559	76,788
Equity	42,591	40,071	35,865	30,460	27,755
in % of balance sheet total	46.4	42.6	43.8	35.6	36.1
Non-current liabilities	21,823	23,797	19,013	20,792	22,505
Current liabilities	27,389	30,201	26,954	34,307	26,528
Total financial liabilities	27,502	31,209	24,383	28,216	27,336
Net financial debts (financial liabilities
less cash balances)	16,883	23,986	17,478	20,800	22,462
ROCE (EBIT/Capital Employed) in %	10.2	10.0	13.2	13.6	7.0
Indebtedness factor (net interest-bearing
liabilities/EBITDA)	1.7	2.5	1.7	2.1	3.5
Headcount (FTE) end year	778	773	766	735	720
Headcount (FTE) average	772	773	751	725	715
Net sales per employee (average)	191	196	194	198	182
26

Alternative Performance Measures

Order Income

The order income includes deliveries within the next six months. Call orders are only disclosed if the partial delivery is scheduled within the next six months

EBITDA (Earnings before Interest, Income Taxes, Depreciation and Amortization)

Earnings before Interest, Income Taxes as well as Depreciation and Amortization on fixed assets and intangible assets. In 2020, the depreciation amounted to a total of CHF 3.3 million (previous year: CHF 3.1 million)

EBITA (Earnings before Interest, Income Taxes and Amortization)

Earnings before Interest, Income Taxes and Amortization on intangible assets

EBIT (Earnings before Interest and Income Taxes)

Operating result, i.e. net sales less cost of goods sold, sales and administrative expenses as well as other operating expenses plus other operating in-come before financial result, non-operating result and income taxes

ROE (Return on Equity)

Return on equity, i.e. net profit divided by the average equity

Net debts

Short-term and long-term interest-bearing financial liabilities minus cash

Free Cash Flow

Cash flow from operating activities minus cash flow from investing activities

ROCE (Return on capital employed)

EBIT/(capital employed [=total assets - current liabilities]) in%

Net debts ratio

Net financial debts /EBITDA

Adjusted for currency effects

Order income and net sales are also shown adjusted for currency effects. Foreign currency effects are adjusted by converting orders and net sales for the current reporting period using the average exchange rates for the same period in the previous year

Stock market capitalization

The stock market capitalization is equivalent to the share closing price, multiplied by the number of shares on the reporting date

Group Companies

Switzerland	France	Singapore
Elma Electronic AG	Elma Electronic France SASU	Elma Asia Pacific Pte. Ltd.
Hofstrasse 93	Parc des Forges	8 Ubi Road 2
8620 Wetzikon	16 rue Hannah Arendt	#07-14 Zervex Building
Phone [phone]	67200 Strasbourg	Singapore 408538
[e-mail]	Phone [phone]	Phone [phone]
[e-mail]	[e-mail]
Romania
Elma Electronic Romania SRL	Great Britain	India
Chi¸soda, DN 59 Km 8 + 550 m	Elma Electronic UK Ltd.	Elma Electronic Private Ltd.
307221 Jude¸t Timi¸s	Solutions House	Green Arch, 1st Main
Phone [phone]	Fraser Road	3rd Phase, J.P. Nagar
[e-mail]	Priory Business Park	Bangalore 560078
Bedford MK44 3BF	Phone [phone]
Germany	Phone [phone]	[e-mail]
Elma Electronic GmbH	[e-mail]
Stuttgarter Strasse 11	USA
75179 Pforzheim	China	Headquarters
Phone [phone]	Elma Electronic Technology	Elma Electronic Inc.
[e-mail]	(Shanghai) Co., Ltd.	44350 Grimmer Blvd.
Building #11, No 198,	Fremont, CA 94538
Israel	Chang Jian Road	Phone [phone]
Elma Electronic Israel Ltd.	Bao Shan District	[e-mail]
34, Modi'in St.	Shanghai 200949
I.Z. Sgula	Phone [phone]	Optima Stantron Corp.
Petach-Tikva 4927177	[e-mail]	2305 New Point Parkway
Phone [phone]	Lawrenceville, GA 30043
[e-mail]	Phone [phone]
[e-mail]
28	Executive Report 2020 Elma Group

Contact

Elma Electronic AG Hofstrasse 93 CH-8620 Wetzikon Phone [phone]www.elma.com

Investor Relations Edwin Wild, CFO

Phone [phone]

Shareholders' Register Jasmine Loetscher Phone [phone]

Agenda

April 15, 2021

Annual General Meeting

August 11, 2021

Half-Year Report at June 30

Annual Report 2020

The Annual Report 2020 is available as full report or as an executive summary. The full version of the Annual Report is available in German language only and is binding. It is only online. The Executive Report is available in German and English. Both documents can be downloaded from our website athttp://www.elma.com/en/investors/reports/

Explanation of statements about the future

This Annual Report contains statements about what the future might hold for Elma, and these are of course subject to uncertainties and risks. The reader must therefore bear in mind that statements of this kind may ultimately be at variance to actual events occurring at a future date. These statements about future prospects take the form of projections of potential developments. All statements about the future are based on data available to Elma at the time this Annual Report was being produced. Elma does not accept any obliga-tion for updating the statements about future prospects contained in this Annual Report to reflect new information, future events or similar developments.

Impressum

Publisher Elma Electronic AG, Wetzikon,www.elma.com

Concept and implementation Linkgroup AG, Zurich,www.linkgroup.chTolxdorff Eicher, Horgen, www.tolxdorffeicher.ch

Editorial Elma Electronic AG, Wetzikon,www.elma.com

© Elma Electronic AG 2021

www.elma.com