- Strong performance in the USA and many developing economies
- Good volume growth from new products
- Robust after market sales
- Investment made in digital printing business; good progress with digital label press products
- Strong operational cash flows and robust balance sheet
- Dividend increased by 10 per cent
Peter Byrom, Chairman, commented “Against the backdrop of a continuing tough economic environment the Group has delivered sales of £312.1 million, underlying profits of £53.7 million and net cash inflow from operating activities before tax of £56.4 million. The Board has declared an increase in the annual dividend of 10 per cent.
“Our businesses in the USA, most of Asia, the Middle East and Africa have all made good progress but in parts of Europe and in China sales were below last year. Market conditions have been more difficult and we continue to see extended sales cycles for equipment. The after market business has continued to perform robustly and while capital spend among customers is reduced compared to last year, consumable sales grew by 6 per cent, in line with our expectations.
“We have been pleased with the performance of our newer product lines and have once again recorded good volume growth in Laser, Thermal Transfer Overprinters and Thermal Ink Jet. Our new digital label press, the K600i, exceeded our sales targets in the year and, following a successful beta trial, we were pleased to launch the N600i full colour label press at PackExpo in the USA during October. We already have first orders for this product.
“Investment in Research and Development was increased to £16.7 million. We have launched a number of new printer and fluids products over the course of the year and have made further progress towards the introduction of a new generation of printers based upon common technology architecture.
“In June, the Group acquired Graph-Tech and PostJet, adding to our core capability in digital printing and opening up new opportunities in this fast growing market.
“TEN Media has made progress with the development of the full supply chain compliance systems which will exclusively use Domino products for all coding requirements. Timing of the roll-out programme remains uncertain.
“We remain cautious about market conditions and their impact on the investment plans of our customers. Against this backdrop we are optimistic about prospects for the future. We continue to invest in new products which are driving growth, our after market business is robust and we expect our investments in new opportunities to contribute to growth in 2013 and beyond”
Against the backdrop of a continuing tough economic environment the Group has delivered sales of £312.1 million, underlying profits of £53.7 million and net cash inflow from operating activities before tax of £56.4 million.
The Group has invested a record amount in Research and Development in the year and continues to pursue a strategy of product leadership. We are very pleased with early sales of the new digital label press and our acquisitions of Graph-Tech and PostJet have added significant capability to our digital print business.
We continue to build a sustainable growth model for the business and despite the current weaker market conditions we have maintained investment in our global service and support organisation.
The Board is proposing a final dividend of 13.39 pence per share, which together with the interim dividend makes a total for the year of 20.63 pence, an increase of 10 per cent on last year. Our cash generation remains strong and dividend cover is 1.7 times.
This has been a busy year for the Board not only in guiding Group strategy but also reviewing and confirming our commitment to the highest standards of governance. The Board has worked with external consultants to undertake an evaluation of its activities and effectiveness, has reviewed its internal processes surrounding communication with the market and has reviewed remuneration policy. While concluding our processes are robust and that the Board is operating effectively, certain changes and improvements to policy and presentation have been made. The Corporate Governance section of the 2012 annual report will contain further details.
Domino is a global business with operations in all regions of the world. We understand the importance of diversity within our workforce. Our extended senior management team comprises a broad mix of gender and nationality and in particular one third of the members of the executive management committee, the senior team below the main Board, are women. Changes were made to the terms of reference of the Nomination Committee of the Board during the year to include diversity and specifically gender as a key consideration in all future Board appointments.
Domino has a strong value system and in our corporate social responsibility report this year we outline how those values are positively influencing our customers, the communities in which we operate and society at large. This year for the first time we have included metrics recording our progress against carbon reduction targets alongside employee KPI’s.
We leave 2012 as we entered it with a combination of uncertainty and instability in world economies. We remain cautious about market conditions and their impact on the investment plans of our customers. Against this backdrop we are optimistic about prospects for the future. We continue to invest in new products which are driving growth, our after market business is robust and we expect the investments we made during 2012 to contribute to growth in 2013 and beyond.
Group Managing Director’s Review
We entered our financial year 2012 with a backdrop of uncertainty in world economies, in particular instability within the eurozone and slowing economic growth in China, both major markets for the Group. Our results for the year reflect these more challenging economic conditions with reported sales of £312.1 million, 1 per cent below last year. There was a small benefit from acquisitions made during the year, offset by the impact of movements in exchange rates. Sales grew by 1 per cent in local currency.
Comparing results by geography our progress has been mixed. We are pleased with performance in the USA, where local revenues grew by 18 per cent, and by the sustained growth we have seen in most of Asia, the Middle East and Africa. Our sales in parts of Europe and in China were below last year. Market conditions have been more difficult and we continue to see extended sales cycles, in particular for replacement equipment. In China this year we identified a third party manufacturer passing off equipment, spare parts and consumables as Domino branded products. We have been successful in stopping the illegitimate supply.
Total equipment volumes shipped in 2012 were at the same level as last year; a combination of growth in new products offsetting a reduction in volumes of traditional technology products. I am pleased with the continued strong growth of our Thermal Transfer Overprinters (‘TTO’), Laser and Thermal Ink Jet (‘TIJ’) products, and sales volumes of the K600i monochrome digital press product introduced this year have exceeded our expectations. Approximately 60 per cent of our revenues are earned from the sale of consumables, spare parts and services to the extensive installed base of equipment operated by our customers worldwide. This after market business has continued to perform robustly and has grown in line with our expectations.
We continue to see an opportunity for growth in digital printing through the use of ink jet technology in a broader printing market. During the year we increased our strength and capability in this business through the acquisitions of Graph-Tech AG (‘Graph-Tech’), PostJet Systems Limited (‘PostJet’) and the purchase of the customer base and certain product designs from Mikrojet, a company based in Germany. Graph-Tech has been our development partner in digital printing for a number of years and completing the acquisition of the business was a natural consequence of the commercialisation of the new digital press product range. Further to success with the K600i, we successfully completed field trials with the full colour N600i, a product that was formally launched into the market in October 2012 and for which we have already received first orders.
The Group has an investment in TEN Media LLC (‘TEN’), a company established to provide compliance and traceability systems to the US egg market. TEN has made progress with the development of the full supply chain systems which will exclusively use Domino products for all coding requirements. Timing of the roll-out programme remains uncertain.
We have invested £16.7 million in Research and Development in the year, delivering new products and making good progress with the development of a common technology platform for our next generation product range.
Underlying profit before tax was £53.7 million in the year, 10 per cent below that reported last year. Underlying return on sales is 17.2 per cent. Economic conditions are not as good as we expected when investing in front line capacity during the recovery of 2010/11, but we have decided to retain capability and capacity in the business and to continue to invest in areas of growth and opportunity for the future. This impacts short-term profit but means the Group remains well placed to deliver sustained growth, even in more difficult markets.
Last year we announced an intention to invest in new factories in India and China and to build new space to increase capacity at our main factory near Cambridge in the UK. Land has been acquired in India and we will commence building work shortly. In both China and the UK our expansion projects have been placed on hold.
Our strategies of product leadership and service excellence remain at the heart of all we do and while market conditions have meant progress has been slower than we would have liked this year, I remain confident in the long-term prospects and outlook for the Group.