Dear Shareholders

Rolf A. Classon (Chairman of the Board), Dr. David Martyr (Chief Executive Officer)

The Tecan Group generated a higher profit and achieved important progress in the implementation of its strategic priorities during financial year 2013. However, we have only partly met the financial objectives for the year that we set at the start of 2013. Sales remained below our original expectations overall although, by contrast, our profitability was favorable, achieving our target for the full year with increases to both our operating profit margin and net profit. In product development we made good progress in three major, strategically important programs in the year under review.

Key figures for 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. On closer inspection, however, the slower sales development has one clear cause, namely lower instrument sales in our Life Sciences Business in the established markets. The economic environment remained challenging in North American and European markets, which were affected by austerity measures and budget cuts. 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. The contribution of recurring sales from consumables and services to total sales rose to 34.1 %, the highest level in the Company’s history.

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 %). 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).

Details on the course of business of the Life Sciences Business and Partnering Business segments can be found in the relevant sections on pages 26 and 32. Details regarding the regional development of sales are discussed in the Chief Financial Officer’s Report on page 69.

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

Tecan’s 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 at PerkinElmer Inc., in various areas and held diverse positions with increasing management responsibility, most recently as Vice President and General Manager Europe, Middle East, Africa and India.


Tecan has a clear strategy to ensure the long-term success of the Company. In our Life Sciences Business we focus on innovation and on successfully launching our new products under development. We want to expand our geographic presence, especially in China and build additional pillars complementing our existing product lines through M&A.

In our Partnering Business, we continue to add new OEM accounts from our well stocked pipeline, we want to deepen the relationships with our existing customers and continue the momentum in our Components business. Also, in the Partnering Business we focus on expanding in China.

Overall, we plan to evolve into a solutions business with more recurring revenues. Deployment of this strategy includes the definition and communication of business-wide priorities for day-to-day work, with a focus on execution planning and delivery. In doing so, we ensure a full alignment across the organization with our corporate goals.

Success in implementing priorities for 2013

At the start of 2013 we defined five priorities.

The first two priorities related to the strategically important OEM development programs Dako Omnis (P16) and ORTHO Vision™ (P14) in the Partnering Business. Development of the Dako Omnis, a new platform for automated advanced staining for tissue-based cancer diagnostics, was successfully concluded in the first half of the year. The instrument was launched by our partner Dako in September 2013.

ORTHO Vision™ 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 our partner Ortho Clinical Diagnostics in October 2013. A further priority concerned the field of innovation as a whole, where we want to make our development process more efficient and increase the frequency of new product launches.

We made good progress in our development programs and by the start of 2014, had already launched several new products that, in particular, improve user-friendliness – this is one of the most important benefits for customers. The launch of the next generation liquid handling platform in Tecan’s Life Sciences Business is still expected to take place in 2014. Further information on new products can be found in the segment report on pages 26 to 37. Nevertheless, we will continue to drive changes to processes and adjustments within our Research and Development organization for a number of years.

Our business in China was another area of focus in the year under review. Here, sales developed well, growing at a clearly double-digit percentage rate and increasing from just over CHF 20 million in 2012 to over CHF 25 million in the year under review.

We also defined the expansion of our components business as a priority in 2013. This business supplies manufacturers of laboratory instruments with essential components and robotic modules. It continued to perform well in the year under review, and has seen strong growth in the last two years. For example, Tecan gained new customers in China and especially benefitted from the fast-growing area of next-generation sequencing.

Priorities for 2014

We have again defined five business-wide priorities for 2014:

Our two partnering programs, Dako Omnis and ORTHO Vision™, remain a priority in 2014. The focus this year will increasingly be on supporting our partners with their regional product launches and the associated ramp up of our serial production. We expect considerably higher production volumes of the Dako Omnis instrument in 2014 compared to 2013, whilst the ORTHO Vision™ instruments will be launched by our customer into several regional markets during 2014.

Tecan is again focusing in particular on expanding its business in China in 2014. We will continue to invest in expanding our sales and service organization by hiring talented and experienced individuals. We anticipate that the majority of sales will again be generated with products from our Life Science Business. However, sales in China by our Partnering Business increased significantly over the last two years and we expect this trend to continue.

Sales in the Life Sciences Business were below our expectations in 2013. The economic situation continued to be challenging, and the established markets in North America and Europe were affected by austerity measures and budget cuts. Thanks to a strengthening of Tecan’s management in various areas, especially through a greater regional focus for the management of the sales organizations and through key product launches, we expect an improvement in our Life Sciences Business in 2014.

We launched a multi-year project to reduce manufacturing costs at the start of 2014. Material costs make up by far the largest share of manufacturing costs. Accordingly, we also see the greatest potential to lower costs here through improvements in the supply chain and in materials purchasing. Based on this, we expect a direct positive effect in existing products, however, the full benefits of this approach will be felt in the medium term with the start of new product development programs and the increased re-use of common modules.

Our strategy includes the objective to reposition Tecan from a highly-specialized instrument company into a solutions business, serving a broader range of applications in both Life Science Research and Clinical Laboratories. We intend to achieve this objective partly through highly selective acquisitions and collaborations. We are especially interested in acquiring companies with selected reagents and consumables to enable us to offer performance-optimized and potentially closed systems. Instruments to broaden our range, including into adjacent market segments, or fill in some gaps in our current offering are also strongly of interest.


Financial year 2014

We expect 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, we expect 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.

Our expectation regarding operating profit margin is based on an average exchange rate forecast for the full-year 2014 of one euro equaling CHF 1.21 and one US dollar equaling CHF 0.92.

Medium-term targets for 2015

Our 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.

We have 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™ will be launched by our customer during 2014. Additional new partner projects are already in development and we continue 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 our Life Sciences Business during 2014 will contribute to growth. In addition, we expect continued strong growth in both business segments in China and in the consumables business.

Our gratitude

We have achieved important successes in implementing our strategic priorities and made significant progress in our major development programs. The Board of Directors and the Group Management Board would like to thank all employees for their commitment and dedication. We thank our customers for their loyalty, and our shareholders and business partners for their trust and continued support.


Männedorf, March 4, 2014

Rolf A. Classon

Chairman of the Board

Dr. David Martyr

Chief Executive Officer