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Financial results: full-year and second half of 2013
Operating highlights 2013 and other important information
Männedorf, Switzerland, March 11, 2014 - The Tecan Group (SIX Swiss Exchange: TECN) generated a higher profit and achieved important progress in the implementation of its strategic priorities in financial year 2013. Sales reached CHF 388.3 million (2012: CHF 391.1 million) and were therefore 0.1% above the prior-year level in local currency terms and 0.7% lower in Swiss francs. The performance of the two business segments differed considerably. While sales in the Partnering Business increased by 5.8% in local currencies, those in the Life Sciences Business were 3.7% below the prior-year level due to lower instrument sales in established markets.
The Tecan Group increased sales in local currencies in the second half by 0.8% after they were 0.5% below the prior-year level in the first half of the year.
Order entry in 2013 rose by 1.9% in local currencies to CHF 386.1 million (2012: CHF 382.3 million), which corresponds to growth of 1.0% in Swiss francs.
Operating profit before interest and taxes (EBIT) increased by 4.0% to CHF 54.8 million (2012: CHF 52.7 million). The operating profit margin improved by 60 basis points to 14.1% of sales (2012: 13.5%), helped by lower research and development expenses as projects near market launch and less cost on the corporate level. Exchange rate movements in major currencies versus the Swiss franc had a negative impact on the operating result. Assuming exchange rates in line with 2012, the operating profit would have reached CHF 56.6 million while the operating profit margin would have stood at 14.5% of sales. Net profit for the year increased by 7.8% to CHF 45.7 million in 2013 (2012: CHF 42.4 million). The net profit margin improved by 100 basis points to 11.8% of sales (2012: 10.8%). Earnings per share increased to CHF 4.16 (2012: CHF 3.92). Cash flow from operating activities rose to CHF 27.9 million (2012: CHF 2.4 million). Excluding an OEM development project that Tecan is prefinancing, cash flow from operating activities amounted to CHF 64.6 million (2012: CHF 45.0 million).
Tecan CEO David Martyr commented: "We have only partly met the financial objectives for the year that we set at the start of 2013. Sales remained, as previously announced, below our original expectations overall. On closer inspection, however, this has one clear cause, namely lower instrument sales in our Life Sciences Business in the established North American and European markets and in Japan. By contrast, we posted solid growth in our Partnering Business. We also recorded clear double-digit sales growth in both business segments in China and in the consumables business. Our profitability was also favorable. We achieved our profitability targets for the year, with increases in both our operating profit margin and net profit.
We focused on our strategic priorities in the year under review and achieved good progress in our development programs. These programs are key growth drivers for the medium term. We will stepwise generate additional sales through the supply of new products in the Partnering Business, building on the established base. Major product launches during 2014 will also contribute to growth in the Life Sciences Business. Overall, we expect an acceleration in sales and a further expansion of the operating profit margin. The growth drivers for Tecan's medium-term goals remain intact, with the expectation of a more significant growth step in 2015."
Information by business segment
Life Sciences Business (end-customer business)
Sales in the Life Sciences Business totaled CHF 223.7 million in 2013 (2012: CHF 235.2 million). The end-customer business constituted 57.6% of total Group sales (2012: 60.1%). In local currencies, sales were 3.7% below the prior-year level, and 4.9% lower in Swiss francs. This decline was largely due to fewer instruments sold in the established North American and European markets, which were affected by austerity measures and budget cuts. By contrast, sales in China and of consumables recorded strong growth. Order entry also remained below the prior-year level in the year under review, but exceeded sales.
Sales did not increase as much as expected in the second half of the year, and in local currency terms were 3.8% below the prior-year period. However, Tecan achieved higher sales than the prior-year period in the second half in North America, and also observed slightly improved sales development in Europe. Order entry in the Life Sciences Business was above the prior-year level in the second half.
Operating profit in the segment reached CHF 18.4 million in the year under review (2012: CHF 29.3 million) and the operating profit margin declined to 7.8% of sales (2012: 11.7%) as a result of the lower sales volume.
Partnering Business (OEM business)
The Partnering Business generated sales of CHF 164.6 million in 2013 (2012: CHF 156.0 million), which corresponds to an increase of 5.5% in Swiss francs and 5.8% in local currencies. Overall the Partnering Business accounted for 42.4% of total Group sales (2012: 39.9%).
Strong growth was achieved in services and consumables, as well as in China. The components business also continued to perform well. Instrument sales fell only slightly, with growth from new business and established product lines largely offsetting a headwind from the phase out of products in the amount of around CHF 15 million compared to the previous year. The largest impact came from a partner who shifted the focus of its combined product portfolio following a company acquisition. Order entry in the Partnering Business also saw pleasing growth.
Sales growth accelerated further in the second half, and was 7.8% higher than the prior-year period in Swiss francs, and 8.9% higher in local currency terms. This development is a reflection of the launch of the Dako Omnis (P16) instrument by Tecan's partner, Dako, in September.
Operating profit in the Partnering Business increased by 38.8% in 2013 to CHF 42.7 million (2012: CHF 30.8 million). The operating profit margin rose to 25.5% of sales due to a higher gross margin (2012: 19.2%).
In Europe, sales in local currencies increased 0.8% compared to the previous year, which equates to a rise of 1.8% in Swiss francs. In light of the continuing challenging economic situation in some European countries, sales in the Life Sciences Business were below the prior-year level. By contrast, the Partnering Business posted strong growth. Growth in the Partnering Business accelerated further in the second half, driven by instrument deliveries to Dako. Sales in the Life Sciences Business also improved slightly. In the second half, sales in Europe were 6.1% higher, or 5.1% higher in local currencies, than in the prior-year period.
Tecan's sales in North America increased by 0.8% in local currencies in 2013, but were 0.2% below the prior-year level in Swiss francs. The components business, which forms part of the Partnering Business, recorded an increase in sales. In the Life Sciences Business, sales were below the prior-year level in North America, as public budget cuts and the government shutdown in October had a negative impact on the market. Tecan's sales rose by 0.7% in local currencies in the second half, and were 1.7% below the prior-year period in Swiss francs. The Life Sciences Business also posted growth in local currencies over the same period.
In China, sales increased in both business segments at a clearly double-digit percentage rate to over CHF 25 million, and continued to accelerate in the second half. Overall, sales in Asia only grew 0.5% in local currencies and were 6.1% below the prior-year level in Swiss francs. Exchange rate movements of the yen versus the Swiss franc had a highly negative impact on sales in Japan. Sales in the Partnering Business increased in Asia, while in the Life Sciences Business, declining sales were posted in Japan and the Asia-Pacific region.
Recurring sales of consumables and services
Recurring sales of consumables and services increased by 10.6% in the year under review, or by 11.3% in local currencies. Their contribution to total sales rose to 34.1%, the highest level in the Company's history (2012: 30.6%). As part of this figure, sales of consumables again grew at a high double-digit percentage rate, by 25.7% and by 26.3% in local currencies to a share of 11.5% of total sales (2012: 9.1%). The growth rate in the second half was around 37%.
Research and development
Research and development expenses in 2013 amounted to 11.7% of sales (2012: 13.1%) or CHF 45.3 million (2012: CHF 51.4 million). All told, research and development activities amounted to CHF 104.1 million gross (2012: CHF 114.6 million), out of which CHF 51.2 million are development costs for OEM partners. This total figure also includes the development costs capitalized in the balance sheet of CHF 10.2 million gross, an increase of CHF 6.2 million over 2012 as development projects progressed and are nearing product launch.
Tecan made good progress in three major, strategically important development programs in the year under review:
Development of the Dako Omnis (P16), a new platform for automated advanced staining for tissue-based cancer diagnostics, was successfully concluded in the year under review. The instrument was launched by Tecan's partner Dako in September 2013.
ORTHO Vision(TM) (P14) is a next generation diagnostics instrument used for blood typing and to determine other important blood parameters. A large batch of instruments for validation was supplied to partner Ortho Clinical Diagnostics in October 2013. ORTHO Vision(TM) will be launched by the customer into several regional markets during 2014.
As previously communicated, the launch of Tecan's next generation liquid handling platform in the Life Sciences Business is expected to take place in 2014.
Strong balance sheet - dividend unchanged
Tecan's equity ratio increased again during the reporting period and reached 72.0% as of December 31, 2013 (December 31, 2012: 69.4%). Net liquidity (cash and cash equivalents minus bank liabilities and loans) increased to CHF 143.4 million (December 31, 2012: CHF 141.3 million). The Company's share capital stood at CHF 1,144,458 at the reporting date (December 31, 2013), consisting of 11,444,576 registered shares with a nominal value of CHF 0.10 each.
The Board of Directors will propose an unchanged dividend of CHF 1.50 per share to the shareholders at the Company's Annual General Meeting on April 14, 2014.
Strengthening of management
The Management Board was strengthened with three new members with comprehensive, industry-specific experience in the life science industry in the year under review.
Dr. Klaus Lun took over as Head of Corporate Development in June 2013.
He was latterly Vice President Global Product Marketing at Molecular Devices Inc., a company belonging to the Danaher Group. He was previously Director Business Development from 2007 to 2011 at Leica Microsystems, also part of the Danaher Group, where he was responsible for corporate mergers, takeovers and licensing.
Dr. Stefan Traeger became the new Head of the Life Sciences Business division in July 2013. He was previously Managing Director of Leica Microsystems CMS GmbH, and as Vice President & General Manager at Leica Microsystems was responsible for the global Life Science division.
Dr. Achim von Leoprechting took over as Head of the Partnering Business division in October 2013. He previously worked in various areas and held diverse positions at PerkinElmer Inc. with increasing management responsibility, most recently as Vice President and General Manager Europe, Middle East, Africa and India.
Financial year 2014
Tecan expects an acceleration in sales in 2014 based on continuing growth in the Partnering Business and an improvement in performance in the Life Sciences Business.
For financial year 2014, Tecan expects Group sales in local currencies to grow at least in the mid single-digit percentage range and for the operating profit margin a further increase of around 50 basis points compared to 2013.
This expectation regarding operating profit margin is based on an average exchange rate forecast for full-year 2014 of one euro equaling CHF 1.21 and one US dollar equaling CHF 0.92.
Medium-term targets for 2015
Tecan's medium-term objectives for 2015 are sales of around CHF 475 million at current exchange rates and a further increase in operating profit margin. This number is adjusted for an estimated negative foreign exchange rate impact of CHF 15 million since the targets were first announced in March 2013 and is also reflecting the 2013 business results.
Tecan has major growth drivers in the Partnering Business in the shape of two significant OEM programs. Dako Omnis is already contributing to sales growth, and ORTHO Vision(TM) will be launched by the customer during 2014. Additional new partner projects are already in development and Tecan continues to discuss several new projects with potential partners which would enable achievement of sales growth in excess of the market level.
Important product launches in the Life Sciences Business during 2014 will contribute to growth.
In addition, Tecan expects continued strong growth in both business segments in China and in the consumables business.
Financial Report and Webcast
The full 2013 Financial Report can be accessed on the Company's website www.tecan.com under Investor Relations. An iPad App for the Tecan Financial Reports is also available from the App Store.
Tecan will hold an analyst and press conference to discuss the 2013 annual results today at 9:30 a.m. (CET). 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)
For 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, and 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 2013, Tecan generated sales of CHF 388 million (USD 419 million; EUR 316 million). Registered shares of Tecan Group are traded on the SIX Swiss Exchange (TECN; ISIN CH0012100191).
|Dr. Rudolf Eugster||Martin Braendle|
|Chief Financial Officer||Head of Corporate
|email@example.com||Tel. +41 (0) 44 922 84 30|
|www.tecan.com||Fax +41 (0) 44 922 88 89|
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