Tecan was able to record stable sales and increased operating profit as well as operating profit margin in the first half of 2013, despite the continuing tough economic environment. As we anticipated, the first quarter was very difficult, with uncertainty around the impact of austerity measures imposed in many countries. In the second quarter, however, we enjoyed a noticeably positive trend with double-digit sales growth and increased order entry.
We have achieved important progress in implementing our priorities for 2013. The development of the key product Dako Omnis was successfully completed and we have started deliveries for commercial distribution. As regards individual markets and products, we enjoyed significant growth in China and in the component business. We confirm the forecast for 2013 that we issued in the spring, but note that the impact of market developments on our Life Sciences Business continues to be hard to predict.
Sales reached approximately the prior-year value, down 0.2%, or 0.5% in local currencies (H1 2012: CHF 182.2 million). After an anticipated difficult first quarter, double-digit sales growth was achieved in the second quarter. Order entry increased by 5.3% to CHF 189.2 million (H1 2012: CHF 179.6 million) in the first six months of the year, corresponding to growth of 5.1% in local currencies. As a result, order entry exceeded sales in the first half of 2013, leading to an increased order backlog at the end of the reporting period.
Operating profit (EBIT) increased by 3.3% to CHF 23.1 million in the first half of 2013 (H1 2012: CHF 22.4 million) despite stable sales. At 12.7% of sales, the operating profit margin also exceeded the prior-year figure (H1 2012: 12.3%). Net profit amounted to CHF 16.5 million (H1 2012: CHF 17.7 million) in the first six months of the year. The decline is the result of a lower financial result attributable to currency hedging measures. The net profit margin reached 9.1% of sales (H1 2012: 9.7%), while earnings per share were CHF 1.51 (H1 2012: CHF 1.64). Cash flow
from operating activities increased to CHF 5.5 million (H1 2012: CHF -8.0 million). Excluding an OEM development project that
Tecan is prefinancing, cash flow from operating activities amounted to CHF 28.4 million (H1 2012: CHF 15.0 million).
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Life Science Business
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As anticipated, the Life Sciences Business segment was affected in the first half of the year by the austerity measures and budget cuts in Europe and North America, which unsettled the markets. Sales in this business segment decreased by 3.2% to CHF 97.6 million (H1 2012: CHF 100.8 million), while in local currencies, sales were 3.5% below the prior-year period. The decline in sales in the first six months occurred entirely in the first quarter, while the second quarter was characterized by a markedly positive growth trend sequentially. Also, sales in the second quarter increased slightly compared with the prior-year period. At the product level, sales of liquid handling platforms in the first six months were below the 2012 level. By contrast, Tecan achieved sales growth in detection devices and services and consumables. Overall, order entry in the Life Sciences Business was also below the prior-year figure, but showed solid growth in the second quarter.
The segment’s operating profit in the first half of 2013 was CHF 1.1 million (H1 2012: CHF 4.8 million). The decline is principally the result of lower sales. The profit margin reached 1.0% of sales (H1 2012: 4.4%). The Life Sciences Business is, to a certain degree, subject to seasonality and therefore generates the majority of the segment operating profit in the second half of the year.
The Partnering Business segment generated sales of CHF 84.2 million during the reporting period (H1 2012: CHF 81.4 million), which corresponds to an increase of 3.5% in Swiss francs and 3.2% in local currencies. Components, services and consumables again posted strong growth in the first half of 2013. Sales of instruments declined, as one partner phased out a product line and, following a company acquisition, another partner shifted the focus of its combined product portfolio. Order entry in the Partnering Business increased significantly in the first half of the year, growing at a double-digit percentage rate. This led to a significantly higher order backlog at the end of the reporting period.
The Partnering Business segment increased its operating profit margin to 29.2% of sales in the first six months of 2013 (H1 2012: 25.6%). At CHF 25.0 million, operating profit was therefore 16.9% above that of the prior-year period (H1 2012: CHF 21.4 million).
In Europe, sales in Swiss francs were 2.8% below the prior-year period and decreased by 3.7% in local currencies. This decrease is primarily the result of lower sales in the Life Sciences Business due to the continuing tough economic situation in some European countries.
In North America, sales rose by 1.6% in Swiss francs and 0.9% in local currencies. Growth in this region was driven by a considerable increase in sales in the component business, which is part of the Partnering Business. Sales in the Life Sciences Business in North America were also below the prior-year figure, as government budget cuts unsettled the market.
Sales in Asia grew by 2.5% in Swiss francs and by 6.4% in local currencies. Both business segments were able to contribute to growth. Sales in China again increased at a double-digit percentage rate.
Recurring sales of services and consumables increased by 7.8% in the first half of 2013, or by 7.5% in local currency terms, and accounted for 35.1% of total sales (H1 2012: 32.5%). As part of this figure, sales of consumables again increased at a double-digit percentage rate, growing by 17.0% in Swiss francs and by 15.8% in local currencies to a share of 11.2% of total sales (H1 2012: 9.6%).
In the first half of 2013, research and development spending was at 11.7% of sales (H1 2012: 12.3%) or CHF 21.3 million (H1 2012: CHF 22.5 million). All told, research and development activities amounted to CHF 54.0 million gross (H1 2012: CHF 55.3 million). This figure also includes the development costs capitalized in the balance sheet (CHF 4.2 million gross) and development costs for OEM partners (CHF 29.8 million).
Tecan announced at the beginning of June that it had successfully completed the major Dako Omnis development program. The new platform for automated advanced staining of tissue samples was co-developed with Dako and is manufactured by Tecan. Dako is an Agilent Technologies company (NYSE: A). The Dako Omnis sets new standards for automated tissue-based cancer diagnostics and Tecan has delivered the first instruments for the market launch.
As communicated before, the launch of Tecan’s next generation of liquid handling platforms is anticipated in 2014.
Tecan’s equity ratio increased further during the reporting period and reached 71.4% as of June 30, 2013 (December 31, 2012: 69.4%). Net liquidity (cash and cash equivalents less bank liabilities and loans) amounted to CHF 130.3 million (December 31, 2012: CHF 141.3 million). The Company’s share capital remained unchanged at CHF 1,144,458 at the reporting date (June 30, 2013), consisting of 11,444,576 registered shares with a nominal value of CHF 0.10 each.
At the Tecan Group Annual General Meeting on April 17, 2013, shareholders again approved a higher dividend versus the previous year of CHF 1.50 per registered share. The dividends of CHF 16.5 million in total (H1 2012: CHF 13.5 million) were partly paid out from the available capital contribution reserve. The payout took place on April 24, 2013.
Tecan expects accelerated sales growth in the second half of 2013 for both business segments.
In an environment that remains hard to predict, we continue to expect moderate growth in local currencies in the Life Sciences Business segment in 2013, but the possibility of a decline in sales in this segment cannot be excluded.
Based on customer forecasts for existing products, in light of the commencement of deliveries of Dako Omnis and the anticipated continuation of dynamic growth in the component business, we continue to expect good sales growth for the Partnering Business segment in fiscal year 2013.
Overall, we continue to expect sales growth for full-year 2013 to be in the mid-single-digit percentage range in local currencies. We continue to anticipate that operating profit margin will grow by around 50 basis points in 2013 compared with 2012.
Männedorf, August 12, 2013
Rolf A. Classon
Chairman of the Board
Dr. David Martyr
Chief Executive Officer