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Financial results 2011
Other important information
Männedorf, Switzerland, March 8, 2012 – The Tecan Group (SIX Swiss Exchange: TECN) closed 2011 with double-digit sales growth in local currencies and a solid operating result. In local currencies, Tecan increased sales by 11.5% compared to the prior year. Exchange rate movements in major currencies versus the Swiss franc had a significant negative impact on Tecan's key performance figures. Sales totaled CHF 377.0 million and were thus 1.7% above the previous year's level (2010: CHF 370.5 million). Growth was broad-based, encompassing both of Tecan's business segments, Life Sciences Business (end-customer business) and Partnering Business (OEM business). Order entry of CHF 383.9 million was slightly below the prior-year level in Swiss francs (2010: CHF 387.0 million), which corresponds to growth of 9.0% in local currency terms.
The operating profit margin reached 13.6% of sales (2010: 15.1%), despite the fact that Tecan increased its research and development spending by 2.4% of sales and recorded additional negative currency effects of 2.3% of sales. At constant exchange rates, the operating profit margin was above the prior-year level at 15.9%. Tecan posted an operating profit (EBIT) in 2011 of CHF 51.3 million (2010: CHF 56.0 million). Net profit from continuing operations amounted to CHF 44.9 million (2010: CHF 46.9 million), while the net profit margin amounted to 11.9% of sales (2010: 12.7%). Earnings per share from continuing operations were CHF 4.18 (2010: CHF 4.50). Additional earnings from a discontinued operation brought net profits for the reporting period up to CHF 47.6 million (2010: CHF 16.2 million) and earnings per share to CHF 4.42 (2010: CHF 1.55). Due to the pre-financing of a major OEM development project, cash flow from operating activities fell compared with the previous year and amounted to CHF 45.1 million (2010: CHF 62.5 million).
Gérard Vaillant, acting CEO of Tecan, commented: "We are delighted about the strong, broad-based growth achieved by our company in local currencies in 2011. In 2011, we elaborated the strategic focus for the future activities of our Life Sciences Business in order to pave the way toward sustained sales growth above the market average in the coming years. In Partnering Business too, we succeeded in further increasing sales despite a high baseline, and we also concluded two new development and supply agreements. Despite increased research and development spending coupled with some significant negative currency effects, we reported solid profitability during the reporting period."
"We set the course for the future development of our business in the year under review. These decisions are laying the foundation for the next phase of Tecan's development. We do, however, face some operational challenges which we are tackling energetically. Innovation is a decisive success factor for achieving sustainable, profitable growth. In the development of two major projects though, we are behind the schedule and face substantial additional costs. We therefore anticipate increased investment in research and development in the coming years as well, which will have a temporary negative impact on the sales and earnings development. We are convinced that the new management and the measures undertaken will allow us to complete the projects successfully and will enable us to benefit considerably from the market success of these products. Tecan continues to be well on its way to a successful future. Thanks to the enduring positive business outlook, the Board of Directors proposes a substantial increase in the distribution to the shareholders for 2011," Vaillant continued.
Regional development and additional information
In Europe, sales in Swiss francs increased by 1.4%, continuing to be negatively impacted by the exchange rate movements of the euro versus the Swiss franc. The average rate of the euro fell by 10.9% against the Swiss franc during the reporting period. In Europe, sales in local currencies increased by 7.4% compared with the previous year. This increase is primarily due to significant improvements in Life Sciences Business (end-customer business), coupled with solid demand in the Partnering Business (OEM business).
In North America, Tecan achieved sales growth of 4.3% in Swiss francs. This key performance figure was also negatively impacted by the exchange rate development of the US dollar versus the Swiss franc. Compared with the previous year, the average rate of the US dollar fell by 14.4% against the Swiss franc in 2011. In local currencies, sales in North America rose by 19.6%. Life Sciences Business (end-customer business) and Partnering Business (OEM business) contributed with roughly the same rate to the strong growth in North America.
Sales in Asia came in at 2.7% and 12.4% above the prior-year's levels in Swiss francs and local currencies, respectively. Tecan recorded clear double-digit growth in China, while sales in Japan, sales rose slightly compared with the previous year.
Total recurring sales of services and consumables increased by 10.6% in local currency terms, and accounted for 30.0% of total sales (2010: 30.6%). As part of this figure, sales of consumables in local currencies grew by 17.0% compared with the previous year, to a share of 8.0% of total sales (2010: 7.6%).
Tecan increased its research and development spending in 2011 from 10.1% to 12.5% of sales, or CHF 47.0 million (2010: CHF 37.4 million). All told, research and development activities amounted to CHF 90.6 million gross (2010: CHF 53.9 million). These figures also include the development costs capitalized in the balance sheet (CHF 3.3 million gross) and development costs for OEM partners (CHF 42.3 million). As previously announced, Tecan is stepping up its investment in research and development for a limited period. Tecan is now also looking at increased research and development spending of around 12% in 2013 and 2014 (so far 10%), as development of the next generation of liquid handling platforms will require more time and investments than originally planned.
Information by business segment
Tecan has been working under a new organizational structure since January 1, 2011. The new structure is focused on the two customer groups, end customers and OEM customers, and divided into the two business segments Life Sciences Business (end-customer business) and Partnering Business (OEM business). The comparative figures for full-year 2010 have been adjusted accordingly.
Life Sciences Business (end-user business)
Sales in the Life Sciences Business segment rose by 0.8% to CHF 232.2 million in 2011 (2010: CHF 230.4 million). In local currencies, this segment reported strong growth of 14.0%. Life Sciences Business constituted 61.6% of total Group sales (2010: 62.2%). This substantial sales growth was primarily generated through liquid handling platforms for customers in the biopharmaceuticals fields in Europe, North America and China. Life Sciences Business recorded a mid-single digit increase in order entry for fiscal 2011, although order entry weakened in the second half of the year and reached the level of the prior-year period.
At CHF 23.8 million, operating profit was down compared with the prior-year value (2010: CHF 26.3 million), corresponding to an EBIT margin of 9.6% of sales (2010: 10.9%). With exchange rates in line with 2010, the Life Sciences Business segment succeeded in increasing its operating profit margin to 13.5% of sales. The considerable increase in investment in research and development was predominantly incurred by Life Sciences Business, and this negatively impacted on the operating profit margin of this segment to the additional tune of 4.8 percentage points.
Partnering Business (OEM business)
The Partnering Business segment generated sales of CHF 144.7 million during the reporting period (2010: CHF 140.2 million). Despite the high baseline in the prior-year period, sales increased by 3.3% in Swiss francs and by 7.8% in local currencies. Partnering Business accounted for 38.4% of total sales (2010: 37.8%). Sales of spare parts and consumables fared particularly well thanks to the significant increase in the installed instrument base in recent years. With regard to sales of OEM instruments, Partnering Business even managed to exceed slightly the high level of the previous year. Component sales were down on the prior year in Swiss francs, but up in local currency terms. The Partnering Business segment reported double-digit growth in order entry in local currencies.
The Partnering Business segment achieved an operating profit margin of 23.7% of sales in 2011 (2010: 25.3%). The majority of the Partnering Business' sales are not subject to any direct currency effects. For this reason, the operating profit margin in constant exchange rates is in line with the reported figure. Operating profit totaled CHF 35.6 million (2010: CHF 36.8 million).
Strong balance sheet – high equity ratio
Tecan's equity ratio increased during the reporting period and reached 69.1% as of December 31, 2011 (December 31, 2010: 67.4%). Net liquidity (cash and cash equivalents less bank liabilities and loans) rose to CHF 163.0 million despite increased investment (December 31, 2010: CHF 135.4 million). The Company's share capital stood at CHF 1,144,458 at the reporting date (December 31, 2011), consisting of 11,444,576 registered shares with a nominal value of CHF 0.10 each.
Significant increase in distribution to shareholders
On the basis of a strong balance sheet and a sustainable good business perspective, Tecan intends to increase significantly its profit distribution to shareholders. The Board of Directors will therefore propose a 25% increase in the dividend from CHF 1.00 to CHF 1.25 per share to the shareholders at the company's Annual General Meeting on April 18, 2012. The dividend will once again be paid out from the available capital contribution reserve and is therefore not subject to withholding tax.
At the upcoming Annual General Meeting, the Board of Directors will propose the election of Karen Huebscher as a new member of the Board. Karen Huebscher has a strong track record with close to 20 years in the pharmaceutical industry. The Board will also propose the reelection of current members Rolf A. Classon, Heinrich Fischer, Dominique F. Baly, Oliver S. Fetzer, Gérard Vaillant and Erik Walldén. Lukas Braunschweiler will not seek reelection at this year's Annual General Meeting to be able to focus on his CEO position at Sonova Holding AG.
New member of the Management Board
The Board of Directors of Tecan Group has appointed Andreas Wilhelm as General Counsel and a member of the Management Board. Andreas Wilhelm is heading the Legal Affairs department at Tecan and acts as secretary of the Board of Directors of Tecan Group Ltd. since 2004.
The Life Sciences Business segment achieved significant growth in 2011. Due to the high baseline of the prior-year period, Tecan is predicting moderate growth in local currencies in the Life Sciences Business segment in 2012.
In the Partnering Business segment, Tecan expects to begin shipping various additional instruments in 2012 thanks to OEM agreements concluded over the last two years. Tecan also expects its existing OEM partnerships to contribute to good sales growth in this segment.
Starting from a substantially higher sales level of 2011, Tecan is targeting low to mid single-digit sales growth in local currency terms in 2012.
Due to the delay and additional costs in a development project, Tecan expects increased research and development spending of around 13.5% of sales in 2012. Therefore, Tecan expects an operating profit margin of 12.2% to 13.2% of sales for full year 2012. This expectation is based on an average exchange rate forecast for the full year 2012 of one euro equaling CHF 1.20 and one US dollar equaling CHF 0.90.
Financial Report and Webcast
The full 2011 Financial Report can be accessed on the company's website www.tecan.com under Investor Relations.
Tecan will be hosting an analyst and press conference to discuss the 2011 annual results at 10 a.m. (CET) today. The presentation will also be relayed by live audio webcast, which interested parties can access at www.tecan.com. A link to the webcast will be provided immediately prior to the event.
The dial-in numbers for the conference call are as follows:
For participants from Europe: +41 91 610 5600 or +44 203 059 5862 (UK)
Participants from the US: +1 (1) 866 291 4166
Participants should if possible dial in 15 minutes before the start of the event.
Key upcoming dates
Tecan (www.tecan.com) is a leading global provider of laboratory instruments and solutions in biopharmaceuticals,forensics and clinical diagnostics. The company specializes in the development, production and distribution of automated workflow solutions for laboratories in the life sciences sector. Its clients include pharmaceutical and biotechnology companies, university research departments, forensic and diagnostic laboratories. As an original equipment manufacturer (OEM), Tecan is also a leader in developing and manufacturing OEM instruments and components that are then distributed by partner companies. Founded in Switzerland in 1980, the company has manufacturing, research and development sites in both Europe and North America and maintains a sales and service network in 52 countries. In 2010, Tecan generated sales of CHF 371 million (USD 356 million; EUR 269 million). Registered shares of Tecan Group are traded on the SIX Swiss Exchange
(TK: TECN/Reuters: TECZn.S/ ISIN: 12100191).
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