Ladies and gentlemen, welcome to the Tecan Group Half Year Results 2019 conference call and live webcast. I'm Iruna, the core call operator. I'd like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Martin Brändle, VP Communications and IR. Please go ahead, sir.
Thank you. Good morning, ladies and gentlemen. Thank you for joining us for our conference call this morning. We are very pleased to discuss the financial results for the first half of 2019 with you. With me on the call are our Chief Executive Officer, Dr. Achim von Leoprechting, and our Chief Financial Officer, Dr. Rudolf Eugster. Before we start, as always, some formalities. The corresponding press release announcing our H1 financial results was issued this morning at 7:00 A.M. Central European summertime. Both this press release as well as the full 2019 interim report are available on the company website, tecan.com, under the Investor Relations tab. The interim report is also available in our IR app for iPads, which can be downloaded from the App Store.
The call is being webcast over the internet on our homepage, and we have also posted the presentation slides for this call for download. With that, let me now turn the call over to Achim von Leoprechting. Achim?
Thank you very much, Martin, and good morning and welcome to the 2019 half year results presentation. Before Rudolf will discuss the financial results of the first half year of 2019 in detail, I will give you an overview on the financial and operational highlights. In the first half of this year, we recorded revenue growth of 8.3% or 8.4% in local currencies, driven in particular by a strong performance in the Life Sciences business. Regionally, we are especially pleased with the performance in North America, where we saw substantial growth compared to the same period of last year. China continued its strong performance, posting double-digit growth in the first six months, almost equally driven by both business segments. Organic growth was 6.3% in local currencies, with positive demand in the instrument business.
Recurrent revenues reached 44% of total revenues, unchanged versus the prior year period, as the new reagent sales from NuGEN balanced out the strong increase in instrument sales. From an orders perspective, we again exceeded revenue and grew backlog double-digit, positioning us well for the second half. Expected, the reported EBITDA margin, including all acquisition-related and one-time costs, was below prior year, whereas the adjusted EBITDA margin was on a similar level when calculated on a comparable basis. Now let me comment on some of the operational highlights of the first half. Earlier this year, we launched DreamPrep, which combines the proven Fluent automation platform with the NGS library preparation reagents from Tecan Genomics, formerly NuGEN. As we have started to demonstrate DreamPrep to several potential clients over the past month, we have received highly positive feedback related to the unprecedented speed and accuracy demonstrated by the system.
The fact it allows labs to perform two library preparation runs in a day with integrated quality control is a convincing argument. We are therefore glad to report that the active funnel for DreamPrep has built quite significantly globally and that the first purchase orders are imminent. The second key launch for our Life Sciences Division is the new Spark Cyto. Spark Cyto has been launched worldwide at a major trade show in June. Spark Cyto allows researchers in academia, pharma, and clinical to perform time cytometry along many other detection modalities in one instrument. The instrument comes with a range of unique features that allow researchers to analyze cells in high throughput using advanced environmental controls, real-time results analysis, as well as automatic execution of kinetic experiments.
That means that further processes can be automated on the basis of the evaluated image data analysis, such as the addition of chemical substances, which may influence cell behavior and/or survival. First customer demonstrations in leading research institutes have been very successful, and commercialization is now in full swing. In both the Life Sciences and Partnering Business, we have made good progress with exciting partnerships providing solutions to infectious disease and cancer diagnostic processes, respectively. Together with QIAGEN, a leading Life Sciences and diagnostic company, we announced a collaboration to co-market modified Fluent automation systems equipped with custom modules, which allow for rapid and robust sample preparation upstream of QIAGEN's QuantiFERON-TB Gold Plus diagnostic test. This combined solution will facilitate high-throughput sample preparation for screening of latent tuberculosis, delivering robust sample aliquots from primary heparin blood tubes.
In our Partnering Business, we announced the development of a customized fluid platform for The Binding Site, a leading IVD company in the field of multiple myeloma diagnostics, aiming to significantly improve the diagnostics of certain blood cancers through MALDI mass spectrometry applications. Not on this slide, but as I've just gotten back from the AACC trade show in the U.S., I'm also very pleased to report that our partner, Sysmex, has issued a press release announcing the launch of the jointly developed PS-10 sample preparation system for flow cytometry. In May, we closed the acquisition of a long-term supplier of critical precision machine parts with operation sites in California, USA and Vietnam. With Tecan being the largest customer, we expect to enhance operating profitability through this integration. We also plan to extend the supplies of additional parts through these operating sites to Tecan in future years.
Now with this, let me hand over to Rudolf, who will discuss the H1 2019 financial results in more detail. Rudolf?
Thank you, Achim, and good morning, ladies and gentlemen from my side as well. As always, I will now guide you through our financial results for the first half of 2019 in more detail. I start with order entry and sales. In the first six months of the year, order entry increased by 4.2% to CHF 310.6 million, again, exceeding the sales realized during the reporting period. This increase equates to a rise of 4.5% in local currencies. On an organic basis, excluding the two most recent acquisitions, order entry rose by 2.4% in CHF and by 2.7% in local currencies. I want to share some additional comments with you why we are not concerned seeing a slower growth rate in H1. One swing factor in order entry always are orders in the Partnering Business segment that tend to come in bulks and are therefore much more volatile.
In the first six months, this was a factor as we did not receive some larger orders in H1, but shortly thereafter. Additionally, the underlying trend is more positive as we had to reverse two bookings and deduct them from our backlog, thereby obviously reducing the order entry growth rate. Let me point out, a very unusual instance for us. One of the cases was based on a communication we received from one of our smaller partnering customers that put at risk any business continuity from their side. We took the prudent step and canceled all orders in our books that we had already received. The second case is in context of the large order for several customized systems that we mentioned in the call in March. Here, our partner faces some delays in their program and canceled several systems he ordered before.
The positive side to this is that we are able to accelerate some activities in the project, allowing us to book some revenues already this year. Despite the somewhat slower pace of the new order entry, our order backlog once again increased significantly as of June 30, 2019. In fact, it grew with a double-digit growth rate driven by both business segments. Sales increased by 8.4% in local currencies or 8.3% in CHF to CHF 296.1 million. On an organic basis, sales grew by 6.3% in local currencies and 6.2% in CHF. In contrast to the previous year, growth in this reporting period was driven by a double-digit sales increase in the Life Science Business. As expected, the Partnering Business recorded only a small increase in sales, following growth of more than 16% in local currencies in the prior year period.
Recurring sales of services and consumables increased in the first half of 2019 by 7% in local currencies, and 7.3% in CHF, and therefore amounted to 44.4% of total sales as Achim already mentioned. Segment sales. Looking at the sales performance of our two business segments. Again, this looks more or less the other way around compared to the prior year. Sales in the Life Science Business segment increased by 15.5% to CHF 162.4 million and were 15.7% above those of the prior year period in local currencies. On an organic basis, that means excluding sales from NuGEN, now Tecan Genomics, half-year sales also increased significantly by 12% in local currencies. Looking at the drivers of this growth, we can clearly highlight the instrument business, in particular, sales of our Fluent automation workstation, which recorded strong growth. Order entry in the Life Science Business also continued to increase.
As a result, the order backlog again increased at a double-digit rate. The Partnering Business segment generated sales of CHF 133.7 million. This corresponds to just a slight increase of 0.6% with no currency impact. This is both in local currencies and CHF. On an organic basis, excluding sales of the acquired supplier for the month of June, sales grew by 0.2% in local currencies. As I mentioned before, the slower development was not a surprise at all after the segment had recorded particularly high growth of 16.1% in local currencies in the first six months of 2018. Looking at orders in Partnering Business. Thanks to solid growth in order entry, like in the life science business, the order backlog in the Partnering Business also increased at a double-digit rate. Looking at the sales development in the different regions.
In Europe, sales in the first six months of 2019 increased by 3.4% in local currencies and by 1.8% in CHF. This increase was despite the high baseline in the prior year, and therefore expected at that level. Keep in mind that in the same period last year, we recorded an exceptional growth of 19.9% in local currencies. This growth last year was mainly driven by the Partnering Business, which is why, to no surprise, the Partnering Business sales this year did not quite reach the prior year level in Europe. By contrast, the Life Science Business recorded considerable growth of 9.6% in local currencies. Let me point out, though, that this increase was more on the basis of the high order backlog from the prior year and not driven by new orders received in the reporting period.
One of the reasons for the smaller increase of the overall order entry. In North America, sales grew by 14% in local currencies and by 16.9% in CHF. The life science business performed particularly well with sales growth in this region of 23.5% in local currencies. Obviously, the sales contribution from acquired NuGEN was mostly North America. Therefore, let me point out that also our organic growth in life science was particularly strong, with an increase of 18.6% in local currencies. The sales development of our Partnering Business in North America was in line with the overall segment growth. In Asia, sales increased by 11.8% in local currencies and 9.2% in CHF. Both segments contributed to the sales growth in the region with good performances. Of special interest for given reasons is obviously the sales development in China.
In this respect, we are happy to share that our sales growth in China outpaced the overall growth in the Asia region. We did not see any impact from tariffs nor from an often described slowdown of the economy. Our next slide addresses our gross profit. Gross profit increased to CHF 141 million, which was CHF 12.5 million or 9.7% above the prior year figure. The gross profit margin increased by 60 basis points compared to the prior year to 47.6%. As always, we had several factors impacting the gross profit margin. On the positive side, we were able, again, to increase prices. As a second positive factor, in contrast to 2018, this year we benefited from the exchange rate movement. Lastly, we continued to benefit from material cost savings. Factors that had a negative impact.
First, this was the product mix, here especially the higher contribution from engineering income in our Partnering Business that comes with lower gross profit margins. However, these activities to develop new instrument platforms for partners are obviously fueling future growth. As expected, the acquisition-related costs were a second important negative factor to the gross profit margin. Our next slide addresses our cost structure. Overall, our operating expenses, less cost of sales, grew more than sales, and with 36.5% of sales were 340 basis points higher than in the prior year. What you obviously need to keep in mind is that all operating expenses in the first six months of this year now include the cost from our latest two acquisitions, especially from NuGEN or Tecan Genomics.
This is the most significant reason for the increase, and I will comment a little more on that when discussing the specific operating expenses. Sales and marketing increased slightly more than sales as we continued investments in our market units. In addition to that, we expanded the dedicated sales force and application support from Tecan Genomics. For example, we hired the first ever colleagues on the ground for our NGS reagents in China. With an increase of 34% or almost CHF 7.6 million, R&D was the biggest driver for the increased operating expenses. Innovation will remain a key sales driver for the future, and we continued our investments in new products. This specifically includes R&D activities at Tecan Genomics. Our overall R&D activities, and therefore gross expenses were higher compared to the prior year period. All the project work for the Partnering Business customers grew.
These activities are typically customer-funded, which gets booked under engineering income and COGS. I had already mentioned the increased engineering income earlier. Overall, we capitalized less R&D in the reporting period. Amortization was at a similar level compared to H1 2018. G&A also increased more than sales, mainly due to the costs related to acquisitions, including for the due diligence work we do and also related to the additional cost in context with the CEO change. I will come back to that on the next slide. Looking at the EBIT and EBITDA development. The reported EBIT, earnings before interest and taxes, decreased by CHF 4.8 million to CHF 33 million. As flagged, this includes acquisition-related costs totaling a mid-single digit million CHF amount, and the non-recurring additional costs I mentioned for the CEO change.
Regarding those additional costs, let me point out that the impact in the first six months was bigger than what we expect for the full year. In other words, the effect will be diluted in the second half, and the total amount in CHF will be smaller than what we had to already book in H1. On the other hand, keep in mind that the adoption of the new IFRS 16 accounting standard regarding leases only had a minimal effect on the EBIT, as only a very small part is booked into interest. Looking at EBITDA, the operating profit before depreciation and amortization. Reported EBITDA grew to CHF 49.3 million. In contrast to EBIT, our EBITDA benefited from the recurring positive effect of IFRS 16.
As I mentioned on the call in March, for the full year 2019, we estimate that the gain on EBITDA will be around CHF 10 million. Looking at the margins. With all factors just explained, the respective reported EBIT margin was at 11.1% of sales, and the reported EBITDA margin reached 16.6% of sales. However, when calculated on a comparable basis with the prior year period, the EBITDA margin for the first half of 2019 was at the same level as in the first half of 2018. Now looking at operating profitability on a segment level. The statements on profitability I made before regarding selling, marketing, and R&D obviously translate into the different segments. However, some elements might only affect one specific segment, or at least they might have a more pronounced impact on a certain segment. I will therefore mostly concentrate on those effects.
The comments regarding G&A mostly affect the corporate consolidation column in the segment reporting. Starting with the Life Science Business. Reported EBIT in the Life Science Business rose to CHF 90 million. The corresponding operating profit margin therefore reached 11.2% of sales, down 90 basis points compared to the prior year period. The main factors here were, on the negative side, the higher R&D expenses that I mentioned earlier, and obviously, the acquisition-related costs. I mentioned before that these acquisition-related costs were adding up to a mid-single digit million CHF amount. This was on the group level, and the full amount was booked into the Life Science Business segment. On the positive side, I mentioned the higher gross profit margin. This was mainly attributable to this segment, including price increases and a positive impact from the change rates.
Lastly, life science business with an organic growth rate of 12%, of course benefited from a positive volume effect. EBIT in the Partnering Business reached CHF 25 million, and therefore was slightly below the prior year level. Not too surprising without any significant volume increase. Higher net R&D expenses were also playing a role in this segment. As I mentioned before, the engineering income for funded R&D work for partners come with a lower margin in this phase of the partnership. Our next slide addresses our net profit. The reported net profit pretty much reflects all elements discussed before, mainly the acquisition-related costs. There is not much to highlight in addition to that, as all the lines below the EBIT, like the financial result, did not develop in any extraordinary way. The tax rate stayed pretty stable at 16%.
Therefore, just quickly, reported net profit for the first half of 2019 was at CHF 25.3 million, and the net profit margin amounted to 8.6% of sales. We move ahead to basic earnings per share. An even shorter discussion here. Earnings per share were at CHF 2.14. The share count increased slightly, not even visible when rounded to the first decimal. We continue with the cash flow. In the first half, cash flow from operating activities reached CHF 36 million, thereby corresponding to 12.1% of sales. Our DSO number, the days sales outstanding, came down from 55 days to 50 days again, the level we had also achieved in H1 2017. This development goes into the right direction and was despite some of our largest partners continuing to manage their cash flows.
The operating cash flow includes CHF 16.3 million for amortization and depreciation, CHF 5.2 million thereof from IFRS 16, another CHF 2.3 million for the PPA, and also CHF 4.1 million from development costs we capitalized in the past. On the other hand, we invested a total of CHF 36.7 million. Included in this figure are CHF 5.2 million for newly capitalized development costs. Investing activities obviously also include the CHF 21.2 million cash consideration for the acquisition of a supplier that was closed at the end of May. It also includes CHF 4.2 million of an earn-out payment in context of the SPEware acquisition from 2016. You might remember that we had booked a similar first payment a year ago. This is now the second and final installment of the total consideration of CHF 10 million we had agreed upon as the maximum. The entire amount was payable as the sales-defined milestones were all achieved.
Clearly a good sign that the acquisition developed as we had hoped for. If some of you wonder why it is CHF 4.2 million here and not CHF 5 million as disclosed in Note 3.2.2 of our interim report. Well, from an accounting perspective, the remaining CHF 800,000 had to be booked as cash outflow in the operating cash flow. It is for the unwinding of the difference between the CHF 5 million and the discounted amount of CHF 4.2 million that we had booked as a contingent consideration at that time. Moving on to the cash flow from financing activities. This includes the dividend payments we made in April this year in the total amount of CHF 24.8 million. Cash and cash equivalents were at CHF 269.7 million at the end of June. This compares to CHF 296.8 million at the end of December 2018.
Our net liquidity position, after deducting all bank liabilities, was at CHF 264.5 million compared to CHF 284.1 million on June 30, 2018. With two acquisitions closed since then is a combined cash consideration for the two deals of CHF 65 million. The next slide shows the key figures. As always, this is just for your reference, as I have already discussed most of the figures on this slide. Let me now hand back over to Achim.
Thank you very much, Rudolf. Coming to the financial outlook for 2019. We confirm the guidance given earlier this year. For sales, we expect growth in the mid-single digit to high single digit percentage range in local currencies. The acquisition we closed at the end of May is expected to add sales in a low to mid-single digit million CHF amount. As usual, potential additional acquisitions are not taken into account in this outlook. For the reported EBITDA and margin, we include, as discussed earlier, integration costs and short-term lower margins associated with the NuGEN, now Tecan Genomics acquisition, that will impact reported EBITDA margins with an expected high single million digits CHF amount. However, the positive and recurring impact of IFRS 16 is expected to largely offset costs associated with the NuGEN acquisition and the COGS transition costs mentioned earlier by Rudolf.
Therefore, the reported EBITDA margin is expected to expand to around 19% of sales in the indicated average FX. With this, I thank you very much for your attention. I think we are ready to open up for Q&A.
Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one at this time. The first question from the phone comes from Daniel Buchta with Vontobel. Please go ahead, sir.
Yes. Good morning, gentlemen. Thank you very much for taking my three questions, if I may. The first one on your order book, you were mentioning some points in that regard already and that it has slowed down. Just to clarify again, some orders have been canceled, but also, do you see some customers becoming more cautious with new orders given the softer macro environment and also the investment cycle in general slowing down? You had a lower comparison base this half-year, while the second half last year was extremely strong. How does that all fit together and what can we expect here for the second half? Do you expect the order book entry to accelerate sequentially again? The second question on the FX side. You mentioned that the gross profit margin was benefiting here in that regard.
As far as I know, you are short EUR, which is good for you because it has weakened, and you are long USD, which is also positive. Here I think you are using hedging. Can you quantify a little bit how much you have benefited in that regard and what it also means for the second half for you? Lastly, on your guidance for the EBITDA margin. My understanding is you guide on a reported basis. On a reported basis, the margin was down in the first half. If you want to reach 19%, that would mean that the second half should be up significantly year-over-year. Is my understanding here in that regard right? Thank you very much. That's very helpful.
Excellent. Thank you very much, Daniel, and good morning to you. Maybe I will address and take the first question while Rudolf will be taking on the second and the third question. On the orders, as explained, there were a couple of factors that we mentioned, which included the very unusual circumstance that we had to cancel orders for the reasons that Rudolf outlined. To your specific questions on what we see in the markets. Overall, I think we still see very solid and sound demand for our product in all geographies.
There is, particularly for the European environment, I would say a bit of increased scrutiny on large capital investments, particularly in the pharmaceutical segments, where we're not seeing any slowdown of demand or the funnel, but more the durations of sign-off on specific projects take a little bit longer than what we initially have seen probably in the back end of last year. Where also, to your point, we may have seen a bit of an acceleration into H2 of 2018, that we're now living on the backlog. Overall, the demand overall for Europe remains to be quite solid. We see that slightly in longer sign-off periods, especially for large instruments installation, not so much affecting areas like the detection business and others, but that's on that level.
Overall, in the other geographies and particularly in North America and China, we see continued very strong development of our funnels and pipelines. As we indicated, from that perspective, we are pretty happy with the performance and have a very solid backlog in view into the second half of this year. The other factor that was mentioned is also reflecting to what we observed several times, as a bit of volatility in the Partnering Business, where sometimes we receive large frame orders and top-up orders for call-offs in June, sometimes we receive them in July, and a little bit impossible to predict when these clients will place these frame orders. This year it was more skewed to the second half placements of these frame orders. Again, that volatility plays into the background. Overall, we are pretty happy with the performance.
As indicated, we even have a backlog left from some of the orders we booked in the back end of 2018. With a pretty solid backlog into H2, we were, I think, on a very good performance basis.
Maybe just quickly a follow-up in that regard. Given the high comparison base you have in the second half with orders coming in, do you expect incremental growth in that regard? That the order book is growing even more?
Of course, we're driving as many orders as possible, but I'm probably not in a position to give a guidance on the orders performance for the second half. We would prefer to stay on the revenue side. As I said, we're looking at very solid funnels in both business divisions and a very good trajectory. With the one exception that we also called out in 2018, where we booked an unusually high single order for a client for customized systems. I think the underlying performance expectation on the orders book remains to be quite strong.
Okay. Thank you.
Okay. I move to the FX question. First, yes, we are short in euro and we are long in U.S. dollars. Second, we have to distinguish between two effects. The hedging effect. Hedging goes fully into the financial result, and second, hedging depends on the balance sheet date exchange rate, whereas the operational impact on the gross profit margin, for example, depends on the average exchange rate. When you look at the hedging, and we only had U.S. dollars obviously. The U.S. dollar balance sheet date exchange rate was pretty similar end of 2018 mid-year. I had a loss on the hedging because the hedging cost is around 3.5% on 18 months. That explains our financial result. Your question regarding the second half. Obviously, the hedging result and the financial result will depend on the December 31st FX rate, which I don't know.
The P&L impact, we will have again the same questions to answer. If in the average the euro goes down, it helps me on the margins, and if the U.S. dollar goes down, it hurts me, and if both go down, then it depends on the mix what happens. Regarding EBITDA, yes, it was down reported in the first half, and yes, I expect it to be significantly higher in the second half. I would like to list three reasons there. First, generally, we have more sales in the second half, and I have a volume effect. That's actually every year. Some years a little bit more, some years a little bit less. Please also have in mind, in the second half, we will not have additional costs, but even a little bit comeback on the CEO change. Second, also on our acquisition.
Of course, I had in the first half of the year, NuGEN, Tecan Genomics for the first time. In the second half, there will only be two months, and after it is comparable. There are three reasons why the second half should be significantly better. This is not unusual. You could go back, for example, to the year 2017. There we had a first half EBITDA margin 16.3% and second half 21.7%. This is not that should surprise you.
Great. Thank you very much.
For any further questions, please press star and one on your telephone. The next question from the phone comes from Maja Pataki with Kepler Cheuvreux. Please go ahead.
Thank you very much. My question actually has just been answered with three points on EBITDA margin expansion for the second half of the year. Thanks a lot.
Once again, to ask a question, please press star and one on your telephone. We have a follow-up question from Mr. Daniel Buchta from Vontobel. Please go ahead.
If no one else wants to ask a question, I have still a few left. The first one on your guidance again, this time regarding the top line. You are guiding for mid-single-digit to high-single-digit local currency revenue growth. Obviously, we have NuGEN in there. My assumption is it is roughly 2% of M&A contribution for the year. That means 3%-8% organic growth roundabout this year. With 6% now, especially the lower end seems to be quite cautious. What would need to happen that the lower end of 3%, 4% organic growth for the whole year is realistic? Then the second one on the corporate line. You mentioned the acquisition costs for NuGEN are in Life Science, obviously included. Then probably you had a bit of acquisition costs also related to the supplier acquisition.
The corporate line went up quite significantly or the consolidation line on EBIT level. What particularly drove that? Thank you very much.
Thank you very much, Daniel, again. Again, we split it in Rudolf, who takes the second part and I will probably start with the first.
Happy to have that.
On the outlook. Listen, of course, it is a range. It is mid-single digit to high single digit, and then the acquisition that you mentioned will play into this, of course. On the other side, the year is still ongoing. We keep to that range and didn't kind of modify that, didn't want to kind of skew to one or the other position. You're right. There's still a lot of work to be done, of course. There's a lot of orders still to be converted into revenues. That's why I think overall, I feel pretty good with the guidance. Of course, we kind of moved a bit upwards in our own thinking in terms of the kind of profile within that range. Overall, I think it's a very solid guidance. I don't want to become more specific here.
You also heard me say about the kind of the backlog performance and some of the other underlying factors. I think we are in a good position to deliver on that outlook.
That's what I think as well. That's why the question.
Okay, I take the question on the corporate costs you raised. I would like to give you three elements in the answer. First is the year 2018, we were, I would say, low with CHF 5.9 million. There are also always some normal volatile parts. We had CHF 7.2 million in the year 2017, for example. What has driven this increase, there are two specific big impacts. One is the M&A-related cost for the due diligence and the closing of the acquisition of the supplier we mentioned. We had to make contracts in two countries, one was in the U.S. and another one was in Vietnam, and then linking the two contracts and everything, and obviously in Vietnam, normally the people don't speak English and things are in Vietnamese. All of that has driven the costs higher than just for a simple acquisition in the U.S.
The second impact was the non-recurring cost for the CEO change. They had also booked in this corporate consolidation.
Okay. Thank you very much.
The next question from the phone comes from Sibylle Bischofberger with ZKB. Please go ahead.
Good morning, gentlemen. I have also a couple of questions. I would like to start with the acquisitions. First, could you give us a flavor, how happy you are with the NuGEN development, as I expected a little more sales there. Secondly, about the small supplier, did you book these sales starting of first of June only in Partnering Business or also in life science business?
Excellent. Thank you very much. Good morning, Sibylle. I will just first comment on the NuGEN acquisition and your comment if we're happy with this, and I can absolutely confirm we are. The trajectory, and as I said, it's twofold. One is we have invested significantly in the commercialization ramp-up of NuGEN products worldwide. We hired the last salesperson in that mix, and we are in full swing to talk to NGS laboratories to continue finding very good interest in the product. Of course, a lot of labs are now in the validation of these assays and these kits, and we expect the acceleration of the franchise accelerating significantly in the second half. The second part, of course, is linked to the launch of the DreamPrep, and I mentioned that in my part of the presentation.
DreamPrep is also coming with a predefined set of NuGEN or now Tecan Genomics, we should say, reagents. As NuGEN also receives a very high interest associated both to the NuGEN instrument performance, but also to the specific nuances and advantages of the NuGEN chemistry that allows far higher productivity of the overall system, we of course expect with installation going forward of DreamPrep a far accelerated adoption and then pull-through of NuGEN reagents on that instrument platform. Keep in mind that we continue to commercialize the kits
Also to competitors. We are not aiming at closing the system. In our direct reagent business in genomics, we are talking to any large-scale NGS facility that may be in a position to adopt these kits. Like I said, we make very good progress, but the adoption and then the scale-up always follows a period of valuation, which naturally is a bit of a time delay in terms of when you first speak to a customer, and then when you see significant volumes of these kits coming from exploratory volumes, I would say, to more industrialized volumes of reagent consumption. Then on the second, on the acquisition, on DCPMI, Rudolf probably will give a comment-
Yes, I.
On the financial allocation.
Yes, your hypothesis is right. We have booked one month, in the month of June, into the P&L, and it is all in PB. This explains when you listen, the difference in the organic growth rate of 0.2% in local currencies to the 0.6% in the reported number.
Thank you very much. I have other questions concerning IFRS 16. The only figure you mentioned was amortization and depreciation, which increased by CHF 5.2 million. Does it mean that the EBITDA was by this amount higher and that EBIT was still only influenced by a couple of hundred thousand CHF? I just want to get a feeling how much IFRS 16 was influencing EBITDA and EBIT. Thank you.
Yes, the amount is CHF 5.2 million. You find that in our half-year report. This means the EBITDA was CHF 5.2 million higher. On the EBIT, it was a very small number, only a few thousand CHF. You get this when you also look at the details in the published half-year report. Again, EBITDA impact plus CHF 5.2 million. EBIT is negligible.
Does it mean also that the financial result is not influenced by IFRS 16, right?
The financial result is impacted by CHF 299,000. There's a difference when the lease payments one would do, we did as cash, is not the same then when you add up the amortization and the interest because there is, in the balance sheet, you have to do some discounting. The two numbers do not give exactly the third numbers. The third number, the impact in the financial result was in interest paid, CHF 299,000.
Okay. Thank you very much.
Once again, to ask a question, please press star and one on your telephone. The next question from the phone comes from Laura Pfeifer with Octavian. Please go ahead.
Yes, hi, good morning. I have two questions on the top line. Maybe just to follow up on the Life Sciences, where you have 12% organic growth in H1. What kind of dynamics could we expect into H2, given just the recent launch of DreamPrep and Spark? I mean, how big of an impact could that have on growth? Maybe on the Partnering Business, what is here the outlook for the second half and what kind of dynamics are driving the growth? I mean, is it mostly coming from new launches or what do you expect from the OEM contract? Thank you.
Okay, thank you very much, Laura. Typically, as we don't really guide on the segment level, I would still like to give you a little bit of flavor on the dynamics on the divisions, and I think it's a great question. On Life Sciences, as I said, we continue to be quite strong on a very broad basis. As to be expected, with particularly DreamPrep, which is a significant CapEx investment, we made very good progress and we have a substantial fund in our build. Of course, the contribution of the overall top-line growth in Life Sciences just by DreamPrep is not going to transform the business. It's going to be a very meaningful number going forward, but it's not in itself a kind of too high lever to the overall performance.
I think we look at it more broadly and as we go forward, DreamPrep will, of course, have a more important impact. I suspect in the second half, we will see a couple of installations, but then continue to accelerate the funding into the next year. In Spark, of course, naturally has a bit of a shorter, I would say, adoption cycle, but still there. We just launched it in June. We are now talking to a lot of institutes and leveraging the previous experiments that we conducted at key opinion leaders. The reception is extremely positive. The turnaround from lead to quote and sales is, of course, somewhat shorter than with the DreamPrep, but still, we're in very early phases of demonstrations.
Of course, we are now adding capabilities of sales and application specialists in an imaging segment of cell analysis that we've not fully captured before or not even entered with a meaningful product range. There is a bit of adoption time still expected from our side. Both will meaningful contribute probably in the midterm, but they will not transform the top-line expectations of Life Sciences. Maybe to the Partnering Business side, like in similar discussions we had on the Partnering Business side, the growth of course is carried by an increased number of clients with different contributions to the top line. Still the biggest that are well-known including also clinical, make the biggest kind of contribution to the overall revenue performance of the business. However, we see now a significant contribution also of smaller scale projects. I mentioned that the Sysmex launched their front-end flow cytometry system.
However, this again is not going to transform the top line, but of course the addition of multiple of these type of projects start to pay dividends and now contribute to the top line also in the second half. Overall, I'm not going to discuss in detail customer performances because that's due to our partners to comment on their business performance. On the broader scale, we are very happy with the trajectory both of existing clients and newer clients, both in North America, Europe, and particularly now in China, that start to significantly contribute to the growth. As outlined before, we are looking at a solid backlog for the staff. Again, all in all, I remain very positive around what I said earlier on the guidance on the top line that we also discussed with Daniel.
For any further questions, please press star and one on your telephone. We have a follow-up question from Mr. Buchta. Please go ahead, sir.
Yes. Thank you very much. For the next round, just one question maybe quickly on the R&D. You mentioned that R&D obviously went up quite significantly with roughly 34%. R&D per se is nothing negative. It is obviously an investment in the longer future. Why is that now necessary that you increase it that much? Is this significantly higher level a new run rate? That would be very interesting to know. Thank you very much.
Maybe I say something and can be [inaudible] . First, you're right, up 34%, but please keep in mind that approximately half of it was from Tecan Genomics, NuGEN, where we have some plans, and we have said that we have plans and predicted or given you that this will have a negative impact in the first year. We do a lot to commercialize and get the synergies and grow the top line. There we did a lot of R&D. Second, is it a new run rate? We do not guide on the different lines on the P&L. Obviously, there is always some volatility. If you look at last year, I would say the R&D level in the first half was a little bit lower than what we had expected. We had, at that time, some troubles to find people.
We have solved that in the meantime, and this we are now a little bit higher in the first half, but I would not conclude from that we have changed somehow the level of R&D we want to do in the long term. We do what is necessary to grow the business.
In addition to what Rudolf said about the kind of expectation and the level of R&D, I would just like to confirm that you should probably see that as a sign of confidence in our strategic outlook and both with our confidence in investing, I would say meaningful into the strategic programs like Tecan Genomics, but also others that are just complementing the strategic direction that we also shared and discussed with you on the capital markets day. Secondly, as also what was discussed earlier, particularly in the Partnering Business, a higher R&D contribution on the engineering income should be seen as a very good kind of sign of progress in the development of new partners and existing partners expanding some of the work that we do with partners in life cycle management.
Overall, as Ruedi said, we are not looking at this as a transformation step, and we are certainly not kind of guiding on the numbers. I think it's in line with the expectations, and this was certainly a very, I would say, for us, positive development overall. Also looking forward with the outcome of the development programs that are under works right now.
Okay. Thank you very much. That's very helpful.
We have another follow-up question from Miss Bischofberger with ZKB. Please go ahead.
Thank you very much. I have first, a question concerning CapEx. You had around CHF 12 million for intangibles and tangibles. Is it fair to assume that I take this number times two for the full year?
The answer is yes, that's a good approximation.
Thank you very much. The other question is concerning M&A. Any news flow there?
As always, we will communicate whenever there's any news. No, yeah. Again, it's a very good, I would say, overall funnel in front of us and with the just close acquisition of DCPMI, of course, we are very happy with the opportunities that we now gain, the company being part of the Tecan Group with all their capabilities in high precision machining, both in North America and Vietnam. Yeah, we will continue to be very active on the M&A side, very consciously of our very healthy balance sheet.
Thank you very much.
Okay. If there's no follow-on questions, I believe we could probably close this call at this moment. I would really thank you all for your time and your active participation. I look forward to speak to you in the very near future. Thank you very much.