To Our Shareholders

The COMET Group is on a successful trajectory with its growth strategy 2020. The investment of the past years in expanding customer relationships, the intensified market development and the tapping of new applications proved effective. In 2016 the COMET Group accelerated its growth from the pace of recent years and delivered its best-ever performance.

Consolidated net sales expanded to CHF 332.4 million, surpassing the prior year by CHF 50 million. Operating income, despite high strategic investment in future growth, jumped by 43% to CHF 36.5 million. Net income rose by more than CHF 10 million to a historic high of CHF 27.3 million. With an equity ratio of 51% the balance sheet of the COMET Group remains very robust. The return on capital employed (ROCE) of 14.9%, with capital costs of 9%, means that the Group continued to generate significant value for shareholders.

Strategy is leading to success – growth accelerated

The growth engine of the COMET Group is firing on all cylinders. Through the consistent implementation of the strategy for growth, the expansion of the key account business was expedited and new markets were developed. The Group substantially boosted its sales, growing in all core regions and in its established segments. The highest sales growth, at 22.9%, was attained by Plasma Control Technologies (PCT). Thanks to its investment during the prior years, this segment was able to further expand its business with key accounts in the semiconductor market. Sales rose for the fourth year in succession to a record CHF 137.6 million. The X-Ray Systems segment (IXS) likewise had a strong year, with growth of 19.8% in sales to CHF 121.4 million. It successfully exploited the positive momentum of the Asian electronics market by targeting new geographic regions and gearing its portfolio more strongly to regional requirements. The x-ray sources and modules business, operating as the Industrial X-Ray Modules (IXM) segment since January 2016, benefited from its consistent forward strategy and a slight improvement in the market's business confidence. Its sales increased by 7.5% to CHF 69.6 million. In the emerging and expanding ebeam Technologies segment (EBT), postponements in the acceptance process for various large systems led to a sales decrease compared to the prior year. However, EBT’s high order backlog at the end of 2016 validates the growth strategy in this segment.

“The Strategy 2020 is working: In our best year since the company began, we have grown in all core regions and the established operating segments.”

Hans Hess, Chairman of the Board

Profitability up significantly – economic profit doubled

Thanks both to disciplined execution of the operational efficiency initiatives and to higher volume, Group earnings grew significantly. EBITDA operating earnings of the COMET Group increased from CHF 35.7 million to CHF 47.7 million. The largest contributions came from the PCT segment, up 37.7% to CHF 30.9 million, and from IXM, up 34.9% to CHF 16.5 million. In the IXS segment, strategic investment in programs like the further development of metrology expertise resulted in an EBITDA decrease to CHF 11.5 million (2015: CHF 12.8 million). In the ebeam Technologies segment the increased investment in the development of new applications, decided at the start of the year, translated into negative EBITDA of CHF 9.1 million (2015: deficit of CHF 9.7 million).

Group net income rose markedly to CHF 27.3 million (2015: CHF 17.1 million). The primary reasons for this record profit, besides the higher sales, were revised pricing and a
significant improvement in operating efficiency. On the currency front, the strong US dollar was a positive driver for net income. Economic profit – or profit after the cost of capital – also increased sharply, more than doubling to CHF 11.0 million (2015: CHF 4.8 million).

“With our focused growth strategy, we have boosted sales by 55% since 2012.”

Ronald Fehlmann, Chief Executive Officer

Group strengthened – growth engine is running

The disciplined execution of the Group strategy is producing tangible rewards. The COMET Group has cemented its position as a leading innovation partner with key accounts and expanded its portfolio in core markets. The strategy's success is clearly reflected in the profitable sales growth of 55% since 2012 and the significant gain in
company value over these years.

With cutting-edge innovations such as the pilot system developed with Bühler for the chemical-free treatment of dry foods and the ebeam Inkjet Dryer for food-safe, individualized digital printing, it has further paved the way for promising new applications. Moreover, the COMET Group has physically and financially prepared the ground for future growth: It started construction for the expansion of production capacity in Flamatt and, to finance the building project, successfully issued its first bond. In the pursuit of operational excellence, the supply chain preparations were made for the increase in production required for the planned growth.

Strategy 2020 for continuing vigorous growth

The Strategy 2020 picks up seamlessly from the forward strategy of the previous years. In the period to 2020, building on the existing technologies and the pooling of its strengths, the COMET Group plans to grow through new applications and by intensifying the collaboration with key customers. The growth target: sales of about CHF 500 million at an EBITDA margin of 16-18%.

True to the motto of “Exploit & Explore”, the strategic focus is on strengthening the core business and at the same time leveraging the three core technologies of x-ray, radio frequency and ebeam to utilize new opportunities for growth through innovative solutions, new applications and close partnerships. With its growth engine, the COMET Group will continue to gain in strength by taking advantage of global market trends. Rich potential for the Group is seen especially in the Internet of Things, in the trends toward 3D technologies and highly functional materials and in the demand for resource-conserving, efficient processes.

“The Group continued to generate value-added: We doubled economic profit despite high investment in strategic initiatives.”

Hans Hess, Chairman of the Board

Leadership changes

The COMET Group has further strengthened its Board by gaining Mariel Hoch and Franz Richter as new Board members and has reinforced the Executive Committee by bringing in Detlef Steck as President of X-Ray Systems (from April 2016) and Thomas Polzer as Chief Operating Officer (from August 2016). In May 2017, René Lenggenhager will assume the position of Chief Executive Officer from Ronald Fehlmann and lead the company in its further growth.

The Board of Directors thanks Ronald Fehlmann very sincerely for his strong commitment over the past six years. During this time he has positioned the Group very auspiciously and made it significantly larger and more profitable. The corresponding confidence of shareholders is evident in a stock price about five times higher than it was a good six years ago.

Positive outlook

The COMET Group is on track. The Board and management are convinced that in the years ahead the COMET Group will consistently continue to generate value-added and, in annual steps of varying size, will reach its growth target for 2020. To this end, the Group will continue to invest heavily in strategic growth areas. For 2017 it expects sales growth to CHF 370-390 million with an EBITDA margin of 13-15% and a further rise in economic profit.

“The consistent strategy execution is proving effective. The COMET Group continued to gain in strength.”

Ronald Fehlmann, Chief Executive Officer

Higher distribution

At the Annual Shareholder Meeting on April 20, 2017 the Board of Directors will propose a distribution of CHF 12.00 per share from distributable paid-in capital (2016: CHF 11.00), exempt from Swiss anticipatory tax. This represents a payout of 34% of net income.

Ten-for-one stock split

The stock price of the COMET Group has risen strongly in the past several years. In 2016 it advanced by 44% and for the first time surpassed CHF 1,000 per share. In order to boost the liquidity and marketability of the stock, the Board will propose at the next Annual Shareholder Meeting to conduct a ten-for-one stock split.

Thank you!

Great progress takes the work of many people. On behalf of the whole Board and management, we extend our thanks to all of the Group's partners, customers and suppliers for their constructive collaboration and their deep confidence in our technologies and our business. Our particular thank-you also goes to all employees of the COMET Group. They made the year's outstanding results possible with their strong commitment and passion. As well, we sincerely thank our shareholders for their continuing confidence.