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Financial results for the full-year 2019 – Highlights
Operating highlights 2019 and other important information
Männedorf, Switzerland, 17 March 2020 – The Tecan Group (SIX Swiss Exchange: TECN) remains on its growth track and can look back on a very successful business year. Tecan once again posted a substantial increase in sales, driven by strong growth in the Life Sciences Business. The company was also able to improve net profit despite the inclusion of acquisition-related costs.
Tecan CEO Dr. Achim von Leoprechting commented: “I’m very pleased that we are able to report another very successful financial year. We reached our growth targets with an increase in sales of 8% in local currencies, driven by double-digit sales growth in the Life Sciences Business. We also recorded a strong increase in the margin in the traditional core business.
Tecan is celebrating the company’s 40th anniversary this year. Since its foundation in 1980, enormous progress in life science research and healthcare have been made. In the meantime, we have arrived in the ‘Century of Biology’ and the world’s laboratories generate more biological data within just a few months than has ever been created in human history. As a pioneer in laboratory automation, Tecan has made much of the progress made to date possible and is in an excellent position to also help to shape further developments. We will continue to gear our activities consistently towards the core applications, which are based on particularly strong growth drivers. We are aiming to achieve continued growth above the market average going forward as well.”
Financial results full-year and second half of 2019
In the year under review, Tecan grew its order entry by 1.9% to CHF 638.6 million (2018: CHF 627.0 million), or by 2.5% in local currencies. The growth was not as strong as in 2018, when order entry benefited in the second half of the year from a large order in the Life Sciences Business for customized solutions and grew correspondingly at a double-digit rate. Adjusted for this effect, order entry in the Life Sciences Business grew at a good mid-single-digit growth rate, leading to a solid underlying growth at Group level as well.
Order backlog, an important indicator for the current financial year, grew again to reach a record level as at 31 December 2019.
Sales for fiscal year 2019 grew by 7.2% to CHF 636.8 million (2018: CHF 593.8 million), corresponding to growth of 8.0% in local currencies. On an organic basis, adjusted for acquisition effects, sales grew by 5.3% in Swiss francs and by 6.0% in local currencies. The growth trend continued in the second half of the year as well, with sales increasing by 6.4% in Swiss francs and 7.7% in local currencies. On an organic basis, sales rose by 5.8% in local currencies in the second half of the year.
Recurring sales of services and consumables increased in fiscal year 2019 by 5.9% in local currencies and 6.5% in Swiss francs, and therefore amounted to a relatively unchanged 41.3% of total sales (2018: 41.8%).
Reported operating profit before depreciation and amortization (earnings before interest, taxes, depreciation and amortization; EBITDA) rose by 11.3% to CHF 122.8 million in the fiscal year 2019 (2018: CHF 110.3 million). This EBITDA as reported includes influencing factors that reduced the overall result: the net impact of acquisition-related costs amounting to around CHF 10 million as well as, to a far lesser extent, the non-recurring additional costs of the CEO change during the fiscal year. These two effects were more than offset by a strong margin trend in the traditional core business (without newly acquired companies) as well as by a positive recurring profit contribution resulting from the adoption of the new IFRS 16 accounting standard (Leases).
The reported EBITDA margin grew correspondingly by 70 basis points to 19.3% of sales (2018: 18.6%).
Reported net profit for the year 2019 rose by 3.5% to CHF 73.2 million (2018: CHF 70.7 million). Thanks to a lower tax rate in connection with the tax reform in Switzerland, net profit increased by more than operating profit (earnings before interest and taxes; EBIT). The net profit margin amounted to 11.5% of sales (2018: 11.9%), while earnings per share rose to a new high of CHF 6.18 (2018: CHF 6.02).
Cash flow from operating activities increased to CHF 98.8 million (2018: CHF 92.7 million), which corresponds to 15.5% of sales.
Information by business segment
Life Sciences Business (end-customer business)
Sales in the Life Sciences Business segment grew strongly by 10.0% to CHF 361.2 million in 2019 (2018: CHF 328.2 million). This equates to a rise of 11.2% in local currencies. On an organic basis (excluding sales from Tecan Genomics/NuGEN for the first eight months), sales in 2019 rose by 9.1% in local currencies.
Sales growth in local currencies remained on a high level of 7.8% in the second half of the year as well, despite the high comparative basis from the prior-year period. On an organic basis, this corresponds to growth of 6.9% in local currency terms in the second half of the year.
The instrument business in particular was the growth driver in 2019, due above all to sales of the Fluent automation platform and various detection devices. But strong growth in the service business and of consumables also contributed to the good result.
Adjusted for a large order for customized solutions in the prior-year period, underlying order entry in the Life Sciences Business grew at a good mid-single-digit rate.
Despite acquisition-related costs, reported operating profit in this segment (earnings before interest and taxes; EBIT) rose to CHF 56.7 million (2018: CHF 51.3 million). The operating profit margin reached 15.1% of sales (2018: 14.8%). This positive performance is primarily a result of sales growth as well as a strong margin in the traditional core business.
Partnering Business (OEM business)
The Partnering Business generated sales of CHF 275.7 million during the year under review (2018: CHF 265.6 million), which corresponds to an increase of 4.1% in local currencies and 3.8% in Swiss francs. On an organic basis, excluding sales of the supplier consolidated in the Partnering Business since June 1, 2019, sales in 2019 rose by 2.2% in local currencies.
After a moderate start to the year, based on a high comparative basis from the prior-year period, sales in the Partnering Business accelerated significantly in the second half and were 7.7% above the prior-year period in local currencies. On an organic basis, this equates to a rise of 4.3% in local currencies. The components business in particular reported strong growth in fiscal year 2019. Underlying order entry in the Partnering Business increased approximately at the same rate as sales
Operating profit in this segment (earnings before interest and taxes; EBIT) was CHF 46.2 million (2018: CHF 48.6 million). The operating profit margin declined to 16.7% of sales (2018: 18.2%), due in particular to increased research and development expenses for new innovative customer-specific projects and a temporary change in the product mix.
In Europe, Tecan’s full-year sales increased by 8.4% in local currencies and by 6.4% in Swiss francs, with both business segments performing well. After moderate growth in the first half of the year, the sales growth in local currencies accelerated in the second half of the year to 13.5%. The increase in sales was driven primarily by higher double-digit growth from the Partnering Business. But the Life Sciences Business also recorded solid growth again in the second half of the year.
In North America, sales grew by 8.2% in local currencies and 9.5% in Swiss francs in 2019. The Life Sciences Business performed particularly well, with sales growth of 15.6% in local currencies in this region. Sales in local currencies increased by a further 3.9% in the second half of the year despite the high comparative basis from the prior-year period.
In Asia, Tecan generated an increase in sales of 14.6% in local currencies and 11.9% in Swiss francs. Both segments contributed to the sales growth in the region with good performances, the Life Sciences Business with growth in local currencies of 18.5% and the Partnering Business with 8.0%. With a slightly higher growth rate, sales growth in China was even a bit more dynamic as in the entire Asia region. Growth in Asia in local currencies accelerated in the second half of the year to 17.0%.
Operating performance 2019
Tecan made good progress in implementing its comprehensive genomics strategy, including the launch of DreamPrep™ NGS only a few months after the acquisition of NuGEN Technologies. DreamPrep NGS, an integrated, fully automated sample preparation solution for next-generation sequencing (NGS) in life science research, combines the high productivity and precision of the Fluent automation platform with the innovative reagents of Tecan Genomics (formerly NuGEN).
The reagent portfolio for NGS sample preparation was also expanded and further kits adapted for use on DreamPrep NGS. The focus on recurring sales generated from reagents and consumables was also strengthened in other core applications, for example in the areas of sample preparation for mass spectrometry as well as specialty immunoassays.
The Spark® Cyto reader platform for cell biology applications was launched in June. Thanks to its additional imaging capabilities, the Spark Cyto multimode microplate reader enables life science research laboratories to track the development of cells in real time over an extended period, with complete control of all environmental parameters. Another special feature of this innovative instrument is that measurements can be carried out automatically for predefined events and further processes automated on the basis of the evaluated image data.
Tecan also made good progress with a number of development projects in the Partnering Business, with various new instruments already being launched by the respective partners in 2019. Overall, more than five projects are still in the development phase, for example a program using mass spectrometry as part of an automated complete solution to diagnose blood cancers. The sales potential of the individual projects ranges from single-digit to clear double-digit million amounts in Swiss francs per year.
In June, Tecan successfully completed the acquisition of a long-term supplier of key parts, vertically integrating the manufacturing of critical precision-machined parts. With two manufacturing sites, one in California (USA) and another in Ben Cat Town (Vietnam), Tecan is benefiting from the long-term supply of high-quality precision-machined parts and realizing cost savings by internalizing their supply.
Strong balance sheet – high equity ratio
Tecan's equity ratio reached 70.1% as of December 31, 2019 (December 31, 2018: 71.4%). Net liquidity (cash and cash equivalents plus short-term time deposits minus bank liabilities and loans) reached CHF 312.4 million (June 30, 2019: CHF 264.5 million; December 31, 2018: CHF 289.6 million). The purchase consideration for the acquisition of a supplier was paid fully in cash in the first half of the year (net cash outflow of CHF 20.8 million).
On the basis of the further increase of net profit in 2019 and an ongoing positive business perspective, the Board of Directors will propose at the Company’s Annual General Meeting an increase in the dividend from CHF 2.10 to CHF 2.20 per share. Half of the dividend, i.e. CHF 1.10, will be paid out from the available capital contribution reserve and is therefore not subject to withholding tax.
Current developments in the various end markets indicate a continued healthy market environment and a further positive growth trend. Tecan therefore once again forecasts sales growth for the full-year 2020 to be in the mid- to high single-digit percentage range in local currencies, as in the previous year. The company is assuming an even higher share from organic growth compared to 2019.
After already reporting a very positive margin trend in the traditional core business in 2019, Tecan is anticipating a further increase in the reported EBITDA margin in fiscal year 2020 to around 19.6% of sales.
Any impact on the full-year business performance of the outbreak of the new Coronavirus (COVID-19) cannot be predicted at present.
The expectations regarding profitability are based on an average exchange rate forecast for full-year 2020 of one euro equaling CHF 1.08 and one US dollar equaling CHF 0.98.
The outlook 2020 does not take account of potential acquisitions during the course of the year.
Financial Report and Webcast
The full 2019 Annual 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 media conference to discuss the 2019 annual results today at 09:00 (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 (0)58 310 50 00 or +44 (0)207 059 107 0613 (UK)
For participants from the US: +1 (1) 631 570 5613
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 automation 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. Registered shares of Tecan Group are traded on the SIX Swiss Exchange (TECN; ISIN CH0012100191).
For further information:
Vice President, Communications & Investor Relations
Tel. +41 (0) 44 922 84 30
Fax +41 (0) 44 922 88 89