Tronic Microsystems : First half 2016 results; public tender offer in progress

Tronics, a designer and manufacturer of innovative nano and microsystems, is listed on the Paris Alternext market (ISIN code: FR0004175099 - ALTRO).

Tronics' Management Board met on September 20, 2016 and approved the accounts for the first half of 2016, which were presented to the Supervisory Board on the same day.

Despite significant business wins and the signing of eight new engineering contracts, revenue for the first half of 2016 stood at €3.1M, a 27% decrease compared to the revenue in the first half of 2015.

Revenue from Manufacturing increased 21% to €1,087K versus €901K in the first half of 2015. Following negotiations during the second quarter, the U.S. subsidiary signed a new contract in July 2016 with its Manufacturing partner. In contrast, engineering revenue totaled €1,975K, down 40% owing to delays on some major projects, which are progressing more slowly than initially expected.

The Group posted an operating loss of €2.4M, i.e. €1.4M higher than in the first half of 2015, mainly due to lower levels of activity. During the first half, the Group reduced its overhead costs in accordance with its cost reduction program, resulting in a 10% decrease in staff and external expenses.

During the first half of 2016, R&D costs stood at €1.1M, of which €295K were capitalized. Work continued on the programs named STARS (« Smallest Tactical AccelerometerS », to develop a MEMS accelerometer block) and TRACE (« Technology ReAdiness Process for Consumer », to accelerate the transfer of consumer electronic products deriving from Magelan and M&NEMS technologies to the automotive industry). Moreover, 5 new patents were filed during the first half of the year.

Total subsidies and research tax credit decreased by €0.6M compared with the first half of 2015, resulting from a reduction in subsidized research programs as they gradually shift to the development and industrialization stage.

FINANCIAL STRUCTURE

As of June 30, 2016, Tronics presented a healthy balance sheet, with shareholders' equity of €12.4M, available cash of €8.8M and gross debt of €5.3M. During the first half, it benefited from a €1.2M innovation loan contracted from BPI to finance the intangible investments related to the industrial and commercial launch of the innovations made in the sector of 3D interconnects and MEMS tailored for watchmaking products.

TRENDS AND OUTLOOK

The Group's priority in 2016 remains to complete its engineering projects and to launch the production of innovative products in the inertial, life sciences and high value-added industrial applications sectors. Tronics also intends to pursue its growth and customer diversification momentum.

Tronics' revenue is expected to increase during the second half of the year, however full-year 2016 revenue will be lower than the previous year. Although the lower-than-expected revenue this year will be partially offset by the €700K cost reduction program, which was fully implemented in the first quarter, it will weigh on the full year results.

ENVISAGED COMBINATION WITH EPCOS AND PUBLIC TENDER OFFER FOR THE SHARES OF TRONICS

On August 1, 2016, EPCOS AG, subsidiary of TDK, and Tronics entered into a 'Tender Offer Agreement' under which EPCOS AG will acquire Tronics, subject to certain conditions (see press release dated August 1, 2016). To this end, on September 16, 2016, EPCOS AG filed a public tender offer to acquire all of the shares of Tronics at a price of €13.20 per share.

Tronics' works council has issued a unanimously favorable opinion on the combination with EPCOS.

Tronics' Supervisory Board, which met on September 20, 2016, has expressed a favorable opinion on the planned Tender Offer and has unanimously decided to recommend that shareholders tender their shares to the Offer. The reasoned opinion of the Supervisory Board and the fairness opinion of the independent expert Ledouble SAS will be reproduced in full in the Response Memorandum, which will be filed by Tronics by September 23, 2016. A dedicated press release will be published on the subject.

The draft Offer Document filed by EPCOS on September 16, 2016 is available on the websites of the French Markets Authority (www.amf-france.org), of EPCOS (http://en.tdk.eu) and Tronics (http://www.tronicsgroup-bourse.com/en/).