We are very pleased that Tecan closed the exceptional and demanding year 2020 again with significant growth in sales and profits. And we are even prouder of the important role Tecan has played in the global response to COVID-19.
This was only possible because our employees stepped up to the challenges presented by the pandemic, supporting our customers with expertise, responsiveness and exceptional dedication.
FINANCIAL RESULTS FULL-YEAR AND SECOND HALF OF 2020
In the year under review, Tecan recorded a surge in orders for product lines supporting the global fight against the coronavirus pandemic. Full-year order entry increased by 33.9% to CHF 855.2 million (2019: CHF 638.6 million), or by 38.5% in local currencies. After orders already grew by 24.3% in local currencies in the first half of the year, with an increase of 51.8% in local currencies order entry accelerated further in the second half. Order backlog even grew at a significantly higher rate than full-year order entry to reach a record high as of December 31, 2020.
Sales for fiscal year 2020 climbed by 14.8% to CHF 730.9 million (2019: CHF 636.8 million), corresponding to growth of 18.7% in local currencies. The growth trend accelerated in the second half of the year, with sales increasing by 23.5% in Swiss francs and 27.8% in local currencies.
Demand for pipette tips increased drastically due to the testing needs associated with COVID-19. As a result, overall recurring sales of services, consumables and reagents also increased in the full year 2020 by 26.2% in local currencies and 21.3% in Swiss francs, thus amounting to 43.6% of total sales (2019: 41.3%).
Reported operating profit before depreciation and amortization (earnings before interest, taxes, depreciation and amortization; EBITDA) rose by 29.6% to CHF 159.1 million in the fiscal year 2020 (2019: CHF 122.8 million). The increase in reported EBITDA was mainly driven by benefits of scale due to the significantly higher volumes. In addition to common economies of scale, reported EBITDA benefited from an even more positive impact as the overall cost base was not yet fully adjusted to support the business on a sustainable basis. The results development was also helped by a one-time positive effect from an adjustment of the Swiss pension plan as well as increased capitalization of development costs as projects neared market launch. On the other hand, exchange rate movements in major currencies versus the Swiss franc had a negative impact on the reported EBITDA, comparable to the one-time positive effects.
Dr. Lukas Braunschweiler
Chairman of the Board
Dr. Achim von Leoprechting
Chief Executive Officer (since April 2019)
The reported EBITDA margin grew correspondingly by 250 basis points to 21.8% of sales (2019: 19.3%). Assuming exchange rates in line with 2019, the reported EBITDA margin would have stood at 22.5% of sales.
Reported net profit for the year 2020 rose by 41.7% to CHF 103.7 million (2019: CHF 73.2 million). Thanks to an improved financial result, net profit increased by more than operating profit (earnings before interest and taxes; EBIT). The net profit margin amounted to 14.2% of sales (2019: 11.5%), while earnings per share rose strongly to CHF 8.69 (2019: CHF 6.18).
Cash flow from operating activities more than doubled to CHF 208.3 million (2019: CHF 98.8 million), due to a focus on cash collection and management. Thus, cash flow from operating activities corresponded to 28.5% of sales (2019: 15.5%).
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 107.
STRONG BALANCE SHEET – HIGH EQUITY RATIO
Tecan's equity ratio reached 66.2% as of December 31, 2020 (December 31, 2019: 70.1%). Net liquidity (cash and cash equivalents plus short-term time deposits minus bank liabilities and loans) reached CHF 467.7 million (June 30, 2020: CHF 354.0 million; December 31, 2019: CHF 312.4 million).
On the basis of the further increase of net profit in 2020 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 2.20 to CHF 2.30 per share. Half of the dividend, i.e. CHF 1.15, will be paid out from the available capital contribution reserve and is therefore not subject to withholding tax.
OPERATING HIGHLIGHTS 2020
During the year 2020, the priorities were focused on ensuring the health and safety of our employees, limiting any supply chain and freight interruptions and maintaining business continuity to support customers in these challenging times. Through the implementation of these measures, we continued to be fully operational at all production sites and provided undisrupted support to customers.
With substantially increased COVID-19 clinical testing and high customer demand associated with the global pandemic, we took a number of steps to secure supplies of materials and expand capacity and supply for specific product lines, including certain instrument platforms and disposable pipette tips. In October 2020, we announced that the U.S. Department of Defense and the U.S. Department of Health and Human Services awarded a USD 32.9 million (CHF 29.8 million) contract to support equipping a U.S. pipette tip manufacturing facility for COVID-19 testing. These payments had no impact on the statement of profit or loss. The new U.S. manufacturing lines are expected to start producing pipette tips in fall 2021, augmenting the steps we have already taken to increase global manufacturing capacity at other locations.
Throughout the year 2020, we were supporting our customers in research, therapeutic and vaccine development and with the scale-up of COVID-19 diagnostic testing. Individual labs, major lab chains, newly built high-capacity testing facilities as well as diagnostics companies around the world were utilizing our equipment, software and consumables as well as our application support to automate and scale up testing.
In August 2020, we announced a new collaboration with Thermo Fisher Scientific to enable PCR-based COVID-19 testing with even higher throughputs to meet increasing global demand. The Thermo Fisher Scientific Amplitude Solution is a molecular diagnostic testing system designed to analyze up to 8,000 samples in a single day. The system includes instruments of Tecan’s Fluent Laboratory Workstation family and the Introspect software, an instrument and consumables usage analysis and reporting software. The rapid go-to market time of this system is another testimony of Tecan´s leadership in innovation in automation solutions as well as our dedication to application, regulatory knowledge and global service capabilities. Furthermore it is an outstanding example of leveraging the synergies between the Life Sciences and Partnering divisions of Tecan.
To further drive our comprehensive genomics strategy, we launched the DreamPrep™ NAP at the beginning of 2020, an integrated, fully automated solution simplifying nucleic acid extraction workflows for many genomic applications. This turnkey system combines the high productivity and precision of the Fluent automation platform with a Tecan reader for integrated quantitation and normalization. The DreamPrep NAP helped labs quickly and effectively scale up COVID-19 testing to accommodate larger test volumes and it was also used to scale up other genomic workflows.
At the same time, we continued to invest in research and development to position the business for sustained accelerated growth. We used new digital tools such as advanced 3D simulation to keep development projects on track despite restricted access to our own and customers' sites. With several projects nearing market launch, we anticipate important product launches in both business segments in 2021 and 2022. In the Life Sciences Business, new products are focused on the application-specific needs of research, pharma and clinical labs. In the Partnering Business, a number of active projects with various partners in Asia, Europe and the US cover our focus application areas including molecular diagnostics and protein analysis, with sales potential of individual projects ranging from single-digit to clear double-digit million amounts in Swiss francs per year.
STRATEGY AND PRIORITIES
It is Tecan’s core business to empower our customers and partners by automating complex laboratory processes and scaling innovation from fundamental research to disease diagnostics. When the pandemic started to spread around the world, we were well prepared to quickly re-focus our capabilities on the fight against COVID-19 and support our global customers in research, therapy and vaccine development, and to an even larger degree with the scale-up of diagnostic testing.
In this respect, 2020 also illustrated our resilience and that we had set the right priorities in our strategy: a high-performing, dedicated and ambitious workforce; flexible, modular hardware and software platforms; a growing range of application specific consumables and global reach with applications and service support. Our focus on key application areas, such as genomics as well as new enabling offerings of digital solutions were crucial elements of our ability to contribute with such high impact.
With a reflection on the learnings of 2020, key pillars of our strategy continue to be:
- Our focus on core applications, especially genomics, protein analysis and cell and tissue analysis. We will continue to increase our modular systems offering for complete solutions with selected reagents, consumables and software.
- The continued focus on our employees, on talent and leadership development and on diversity and inclusion as the core of the Tecan culture.
- The focus on customer satisfaction and proactive partnership to fulfill our promise of “Always There For You”.
- To drive continuous improvements through a global deployment of lean processes, proven methods and innovative tools.
- All of the above will contribute to our dedication for sustainable development as sustainability is deeply embedded in our corporate culture.
Going forward there is a huge opportunity to build on what we have learned from the global response to COVID-19 and apply it to other health challenges like cancer, metabolic diseases and other infectious diseases. With our broad portfolio of existing products and new important launches we expect in 2021 and 2022, we are confident and excited to continue to scale innovation to the benefit of healthcare and the lives of people.
Based on the high order backlog and continued elevated demand for instruments and consumables, we expect a very strong business performance in the first half year 2021. Demand trends for COVID-19-related products are subject to greater uncertainty in the second half of 2021. Therefore, a decline in sales in the second half of 2021 compared with the very high base of the prior-year period cannot be ruled out. On the other hand, particularly for the second half year, Tecan expects some recovery and a more positive market environment in areas that have been negatively affected by the pandemic, such as life science research, pharma and non-COVID-19 diagnostic testing.
We therefore forecast sales growth for the full year 2021 to be in the mid single-digit to mid-teens percentage range in local currencies.
These projections are based on the assumptions that supply chains remain undisrupted and all production sites stay fully operational.
Despite a more negative currency environment and the absence of extraordinary effects from 2020, we expect a reported EBITDA margin for the full year 2021 at least at the 2020 level of 21.8% of sales.
The expectations regarding profitability are based on an average exchange rate forecast for full year 2021 of one euro equaling CHF 1.08 (actual average exchange rate 2020: 1.07) and one US dollar equaling CHF 0.90 (actual average exchange rate 2020: 0.94).
As always, the outlook 2021 does not take account of potential acquisitions during the course of the year.
EXPRESSION OF THANKS
The way in which basic research, diagnostics, the pharmaceutical industry, regulators and public institutions have collaborated to address the major challenges posed by the new coronavirus has been unprecedented. We at Tecan are proud to have been able to contribute to this global effort and would like to thank all our business partners and customers for their cooperation and commitment in the fight against the pandemic. Only together have we been able to make this progress.
The success and impact achieved in 2020 was only made possible by the exemplary commitment of our employees. On behalf of the Board of Directors and the Management Board, we therefore extend our special gratitude to all our dedicated colleagues around the world for their personal contributions.
Finally, we would like to express our thanks to our shareholders for the continued trust they have placed in us.
Männedorf, 11 March 2021
Dr. Lukas Braunschweiler
Chairman of the Board
Dr. Achim von Leoprechting
Chief Executive Officer