H1 2008: Continued solid profitability at Tecan

The slight decline in these figures is largely the result of adverse currency effects during the reporting period. These had a detrimental impact on Tecan's development in the first half of the year – in particular due to the depreciation of the US dollar against the Swiss franc.

Thomas Bachmann, Tecan CEO, commented: “We are pleased that we were able to largely maintain our strong levels of profitability despite depreciation of over 15% in the US dollar. Our largest business segment, Liquid Handling & Robotics, performed well. Sales in local currency in the segment grew by 7% in the first half of the year and the operating result in Swiss francs rose by 16%. The positive development in this segment was boosted by the high double-digit growth in the strategically important OEM business, further growth in sales of consumables and by the service section. Our increased activities are thus starting to bear fruit, and the encouraging development supports our strategy of further expansion in these areas. We have taken steps in those business areas where performance was not in line with targets. We still consider our goal of an increase in sales in local currency with no year-on-year change in operating profitability to be achievable.”

Differing regional and product-specific developments After weak development in North America in the prior-year period, Tecan achieved sales growth of 6.2% in local currency there. Sales declined slightly in Europe. The development in the various European countries was mixed. Sales declined overall in Asia. Although they increased in the emerging Chinese market, they were significantly lower in Japan than in H1 2007. Tecan's strategically important worldwide OEM business recorded strong growth. Sales in consumables and the service business also increased considerably.

Order entry declined by 2.1% to CHF 186.9 million in the first half of the year largely as a result of currency effects (H1 2007: CHF 190.9 million). In local currency Tecan achieved order entry growth of 5.4%.

Strong profitability maintained Tecan again reported strong profitability in the first six months of 2008. With 12.6% of sales, the EBIT margin was almost at the level of the previous year (H1 2007: 12.7%). The 7.1% decline in operating profit to CHF 23.1 million is largely attributable to the depreciation of the US dollar against the Swiss franc and an operating loss in the business segment Sample Management. The negative currency effect on operating profit of Tecan was CHF 5.9 million. However, higher margins and cost discipline enabled Tecan to recoup CHF 4.2 million of this, and limit the difference in the operating profit to CHF -1.7 million. The high EBIT margin generated in the largest business segment Liquid Handling & Robotics increased yet further.

As a result of the lower operating profit and a CHF 2.5 million lower financial result, Tecan's semi-annual net profit was 12.7% below the prior-year period at CHF 19.0 million (H1 2007: CHF 21.8 million). Compared to the record levels of the previous year, earnings per share declined to CHF 1.71 for the first six months of 2008 (H1 2007: CHF 1.89).

Business segment information Components & Detection Sales in the Components & Detection business segment fell by 12.8% in H1 2008 to CHF 47.8 million (H1 2007: CHF 54.7 million).The decline is largely due to a higher vulnerability to exchange rate fluctuations of the US dollar, an increased competitiveness of US-based peer companies as a result of the US dollar depreciation and a high basis effect driven by unusually high components sales in the first half of 2007. Sales dropped by 4.8% in local currencies. Despite the decline in sales, Components & Detection slightly increased its EBIT margin to 8.7% of sales, compared with 8.6% for the same period the previous year. At CHF 4.5 million, earnings before interest and taxes (EBIT) was 12.5% lower than that of the first half of 2007 (H1 2007: CHF 5.2 million).

Liquid Handling & Robotics Tecan’s largest business segment, Liquid Handling & Robotics, demonstrated encouraging performance in the first half of 2008, generating around two-thirds of group sales. In Swiss francs, sales of CHF 122.5 million remained largely unchanged against the prior- year period. Sales in local currency increased by 7%. Liquid Handling & Robotics recorded strong sales growth, primarily in the OEM business, the sale of consumables and the service section. EBIT rose by 16% to CHF 26.9 million (H1 2007: CHF 23.1 million). The EBIT margin increased to 21.8% of sales (H1 2007: 18.7%), a level comparing favourably to international peers. This is evidence of the sustainable nature of measures designed to increase operating efficiencies implemented in the last few years. Orders in Swiss francs were considerably higher than the first half of 2007, and recorded a double-digit increase in local currency.

Sample Management Sales in the Sample Management business segment fell in H1 2008 by 29% (27.5% in local currency) from CHF 18.8 million to CHF 13.3 million. Following EBIT of CHF 1.1 million in the prior-year period, Sample Management posted an operating loss of CHF 4.0 million for the first six months of 2008. This unsatisfactory performance was due to sustained tension in the market for large-scale storage systems, the delayed market launch of Sample Safe® and the high investments in R&D for that innovative storage system. Sample Management has introduced measures to increase sales and earnings power. These measures include strengthened marketing activities and project management and increasing efforts to lower costs. Since July 1st, 2008, the business segment has been headed by Domingo Messerli, a manager with international industry experience.

At the beginning of July, after the reporting period ended, Sample Management concluded a pending order for a large-scale plant in the amount of over 5 million Swiss francs from a leading European pharmaceuticals company. This amount is not included in the sales or order entry figures for the first half of the year.

Strong balance sheet – high equity ratio The equity ratio rose once again to 54.7% as at 30 June 2008 (30 June 2007: 53.3%).Tecan achieved the higher equity ratio despite the buy-back of more than 350,000 of the company’s own shares in the first half of 2008. Net liquidity on the reporting date was CHF 29.6 million (30 June 2007: CHF 33.3 million). Tecan's balance sheet thus remains strong. The capital reduction and the par-value repayment of CHF 0.45 per share approved at the Annual General Meeting on 23 April 2008 were undertaken on 18 July 2008. The par value of a registered share is now CHF 0.10 per share.

Outlook Tecan assumes that the low US dollar to Swiss franc exchange rate will continue for the rest of the financial year. This will also have a negative impact on sales performance in the second half of 2008. Tecan aims to continue to implement its long-term growth strategy, thus driving on product innovation and tapping new geographic markets and customer segments. To sustain the company’s high level of profitability, Tecan regularly implements additional measures for increased efficiency and maintains strict cost discipline. If the macroeconomic challenges do not become any tougher, Tecan believes that an increase in sales in local currency can still be achieved with no change in operating profitability over the previous year, on the basis of solid orders and a good project pipeline.

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