Tecan reports a 40.8% sales increase for the first half of 2001

• Sales reach CHF 174.5 million
• Net profit increases by 37% to CHF 20.9 million
• In a tight market, Q2 sales reach a record CHF 90.3 million
• Sales growth accelerates in local currencies from 33% to 41%

Zurich, Switzerland, 24 July 2001 – Tecan, a leading player in the fast-growing Life Sciences supply industry, reported today worldwide sales of CHF 174.5 million for the first half of 2001, an increase of 40.8% compared with CHF 124.0 million in the same period 2000. In local currencies, sales increased by 40.5%. Net profit for the first half increased by 36.9% to CHF 20.9 million (2000: CHF 15.2 million), resulting in a record first half for the Tecan Group.

“Compared to the first half of last year, Tecan sales growth in local currencies accelerated this year from 33.4% to 40.5% despite a difficult market environment for the Life Sciences industry. This outstanding performance clearly validates our business strategy. We clearly benefit from our portfolio effect which includes a full product range, global geographical reach and access to all the segments of the Life Sciences industry.” said Emile Sutcliffe, CEO of the Tecan Group.

“We are developing synergies among the four markets that provide us with unique business opportunities and result today in the successful expansion in the high growth markets of Genomics and Proteomics. For the year 2001, we are on track for a solid performance, which will allow Tecan to reach its ambitious objective of 35% growth in local currencies”.

Sales in Genomics/Proteomics and Diagnostics increase by more than 60%

In Genomics and Proteomics, sales increased by 64.4% in the first half 2001 to CHF 34.2 million (2000: CHF 20.8 million), or 19.6% of sales. Tecan’s continued success in this very dynamic market is due to strong demand for the company’s front end sequencing systems and in functional genomics for the discovery and scoring of genome variations (SNP Single Nucleotide Polymorphism). Drug Discovery sales reached CHF 60.4 million or 34.6% of total sales for the first half 2001, an increase of 9.1% (2000: CHF 55.4 million). This positive sales growth was achieved despite adverse market conditions for drug discovery sales in the first half of the year, resulting from lower R&D expenditures from large pharmaceutical companies. Tecan anticipates a gradual improvement of these market conditions in the fall as the need for pharmaceutical and biotech companies to improve efficiencies and eliminate essential bottlenecks in the drug discovery process remains a critical success factor.

Diagnostic sales increased by 66.9% in the first half to CHF 79.8 million (2000: CHF 47.8 million) or 45.8% of total sales. This strong sales growth was driven by increasing market penetration of the Genesis FE 500 workcell as well as by new applications in molecular diagnostics resulting from Tecan's expertise in genomics. This division also benefited from the development and implementation of new distribution channels.

Europe and North America set the pace for continued strong growth

Both Europe and North America posted significant growth during the first half of 2001. By location of customers, sales in Europe increased by 38.8% in local currencies to CHF 63.9 million (2000: CHF 47.1 million) or 38.8% of sales, whereas North American sales increased by 38.1% to reach CHF 85.8 million (2000 : CHF 60.1 million) or 49.2% of sales. Sales in Asia grew by 36.4% in local currencies to CHF 15.0 million (2000: CHF 11.7 million) or 8.6% of sales, whereas sales in other markets, 5.6% of total sales increased by 95.5% to CHF 9.8 million (2000: CHF 5.1 million).

Significant increase in R&D to fuel future growth

Tecan’s gross profit margin remained stable at a high 68% in the first half 2001. During the same period, gross R&D expenditures increased significantly to CHF 23.2 million (2000: CHF 13.3 million) and represented 13.3% of sales (2000: 10.7%). Substantial R&D resources were allocated to the development of Tecan’s revolutionary microfluidics platform, the Lab CD TM, that has many potential applications in Tecan’s businesses, and to the field of Proteomics, which represents the single greatest business opportunity for the company.

The amortization of goodwill from acquisitions and capitalized R&D costs amounted to CHF 2.3 million (2000: CHF 0.6 million), or 1.3% of sales during the period. Additional significant investments were also made during the period to implement new processes and information systems to sustain the company’s high growth rate. Considering the substantial increase in R&D investments and amortization of goodwill, Tecan’s Ebit would have been at the previous year’s level. Despite of these investments and the amortization of goodwill, operating profit increased by 12.3% to CHF 28.2 million (2000: CHF 25.1 million) or 16.2% of sales.

The net financial result was positive during the period, due to the impact of unrealized currency gains caused by a strong dollar versus the Swiss franc as per end of June. With a slightly improved income tax rate, net profit for the first half of 2001 increased by 36.9% to CHF 20.9 million (2000: CHF 15.2 million). Earnings per share increased by 37.3% to CHF 1.62 from CHF 1.18.

Outlook

Having achieved, during the first half of the year, a very strong result in a difficult market environment for the Life Sciences industry, Tecan expects to maintain this level of performance also in the second half of the year. Assuming continuing strong demand in all markets, Tecan anticipates sales growth of around 35% in local currencies for the business year 2001. The company’s goal for R&D expenditures remains at 10-12% of sales this year. Taking into account an ongoing strict control of operating expenses, the EBIT margin should be sustainable around 20% of sales in 2001, while net profit is expected to reach around 14% of sales.