Tecan remains on its growth track We can look back on another very successful fiscal year, in which we again achieved a significant increase in sales. In the year under review this was in particular driven by strong growth in the Life Sciences Business. We were also able to increase our net profit thanks to a strong development in the margin in the traditional core business.
This year Tecan is celebrating the company’s 40th anniversary. As a pioneer in laboratory automation, Tecan has been instrumental in enabling many of the advances in life science research since its foundation in 1980. Today we are in an excellent position to significantly help shape future developments as well in the market segments we serve. Therefore we will continue to gear our activities consistently towards the core applications, which are based on particularly strong growth drivers. We aim 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.
Details on the course of business of the Life Sciences Business and Partnering Business segments can be found in the relevant sections on pages 30 and 38. Details regarding the regional development of sales are discussed in the Chief Financial Officer’s Report on page 104.
Dr. Lukas Braunschweiler
Chairman of the Board
Dr. Achim von Leoprechting
Chief Executive Officer (since April 2019)
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 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.
STRATEGIC ORIENTATION AND PRIORITIES
THE CENTURY OF BIOLOGY
Since Tecan’s foundation in 1980, enormous progress in life science research and healthcare have been made. For example, in the 1990s work was carried out on decoding the human genome for the first time. At that time this was a monumental undertaking in which numerous research institutes around the world were involved. It took a total of 13 years and the cost ran to several billion US dollars. The result was the mapping of the sequence of a single human genome. Today, gene sequencing is a daily routine in numerous laboratories around the world. It helps in the detection of hereditary diseases, in cancer diagnostics and in non-invasive prenatal diagnostics – within a few days and at costs of less than 1000 US dollars per sequencing. Some experts in the field anticipate that in future, most people in developed nations will undergo gene sequencing at least once in their life. This means that we have truly arrived in the “Century of Biology”, and the world’s laboratories generate more biological data within just a few months than has ever been produced in human history. In addition to genomics, protein and cell analysis are for us essential applications that provide complementary data for decoding biological issues, the development of effective drugs and increasing personalized diagnosis of patients.
Over the last four decades, Tecan has helped drive progress in life science research. How will the company continue to be this driving force in the future?
FOCUS ON CORE APPLICATIONS
We cover a large number of different application areas in research and diagnostics thanks to our two divisions, the Life Sciences Business and the Partnering Business. We will continue to do this in future as well. However, we intend to focus especially on three core applications that are based on particularly strong growth drivers:
- Protein analysis, particularly workflows of mass spectrometry
- Cell and tissue analysis
These three applications are generally used in life science research as well as in in-vitro diagnostics. Both business segments therefore offer growth potential for Tecan. In the three core applications, we want to increasingly offer complete solutions, i.e. not only instruments but also selected reagents and consumables.
FOCUS ON THE EMPLOYEES
Founded in a barn by Lake Zurich, today Tecan has an international workforce of around 2,000 employees from 50 nations and is increasingly present in all regions of the world. Our employees are the foundation for the company’s successful development, and each day they contribute to progress in life science research and diagnostics. This contribution, providing a positive impact on people’s well-being and health is an important part of Tecan’s corporate culture. We have grown strongly in recent years and we wish to continue growing in future. This means that the number of employees will continue to rise globally in the coming years. It is therefore of particular importance that our own talents are developed and promoted. With this in mind, we have also started a global talent management program for the first time, entitled “NextGen Tecan”. Tecan is an attractive employer for whom diversity and inclusion in the workforce are key values of the personnel policy. Changes in society due to demographics may in future also mean a shortage of talent and specialists on international labor markets. In order to be able to address the best specialists as an attractive employer in future, too, active staff promotion and further development of the corporate culture are therefore also other points of focus for our corporate practices.
FOCUS ON THE CUSTOMERS
For Tecan, customer centricity is the most important guiding principle and the basis for a sustainably successful business model. Our central customer promise is “Always There For You” – all of the company’s activities are geared toward its customers. The satisfaction of our customers is a decisive factor for the successful and sustainable development of the company. Open communication is essential in order to guarantee high satisfaction levels over the long term, which also boosts loyalty to Tecan. We actively seek constructive criticism and have integrated this into continuous improvement programs. The expansion of our broadly supported customer satisfaction program and implementation of measures leading to an improved customer experience represented key points in the year under review, and will continue to be a priority in future.
FOCUS ON EFFICIENCY AND SCALABILITY
Tecan has had a continuous improvement process in place for several years. The production system has been consistently aligned to the principles of lean manufacturing. A continuous improvement process is also being implemented in areas other than production, such as sales, service and support processes. This is done partly on the basis of customer surveys and ideas from the workforce. Driven by the strong growth of the past few years, a greater significance will be given to standardizing processes in future. We have thus begun to define the processes, methods and tools we use, and to continuously analyze the relevant key figures and measure progress: The Tecan Way!
In addition, we continue to work on more efficient processes in procurement and logistics, as well as on reducing material and production costs. We have made great progress in this area in recent years. We have also succeeded in achieving a leading position in the field of R&D, in order to ensure a continuing high level of innovative output with more efficient development cycles in coming years. For this purpose we have developed modular platforms that we can increasingly build on, in both hardware and software. Thus for example hardware components and software code can be re-used to create new configurations – without having to start from scratch. This makes it possible to offer faster time to market, reduced life cycle management cost, and the ability to use the modular platforms in a variety of different applications. At Tecan, digitalization technologies have already found their way into many work and product areas. Also in the future, we will focus developments on the effective use of digital technologies from sales through product development and product operation to service.
FOCUS ON SUSTAINABLE DEVELOPMENT
A company can only prosper and secure its existence in the long term if it pursues ecologically and socially sustainable principles in addition to economic ones. Sustainability must be deeply embedded as a mindset in the business, its structures and procedures – in other words, in its corporate culture. Therefore sustainability is more than just a series of individual measures. This is the case at Tecan. Regarding this we refer you to the 2019 Sustainability Report, p. 44. We have included a great deal of additional information on topics that are of particular relevance to us.
Current developments in the various end markets indicate a continued healthy market environment and a further positive growth trend. We 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. We are 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, we anticipate 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 2020 outlook does not take account of potential acquisitions during the course of the year.
EXPRESSION OF THANKS
We can look back on 2019 as yet another highly successful financial year. This success was only made possible by the exemplary commitment of our employees. On behalf of the Board of Directors and the Management Board, we extend our thanks to all our dedicated colleagues around the world for their personal contributions.
On the occasion of our 40th anniversary, we would also like to thank all former employees who built up Tecan and made it the company it is today. And last but not least, our respect and recognition go to the founders of Tecan for their bold and visionary foresight in setting up this enterprise in 1980 on the banks of Lake Zurich as a pioneer in laboratory automation.
Finally, we would like to express our thanks to our customers for their cooperation and loyalty, and to our shareholders and business partners for the trust they have placed in us. We look forward to working together in the future.
Männedorf, March 5, 2020
Dr. Lukas Braunschweiler
Chairman of the Board
Dr. Achim von Leoprechting
Chief Executive Officer