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Trading Review 2007 |
A record year of sales and profits for the Group, with increased volumes and growth in revenues of printers, fluids, spares and services. Collectively, businesses acquired in recent years have delivered on-target contributions. I am particularly pleased that our growth is being delivered from all parts of our expanded product portfolio and that the strength of our brand has enabled us to introduce products from newly acquired businesses successfully. Sales of the Group grew by 11 per cent. Large movements in currency exchange rates have impacted reported numbers, at constant exchange rates our sales growth was 14 per cent. Operating profit grew by 12 per cent to £31.5 million. Underlying operating profit after excluding amortisation of acquired intangible assets and exceptional costs was £32.2 million, 7 per cent up on last year’s £30.3 million; giving an operating return for the business of 13.9 per cent. The decline in value of the US dollar against sterling was the primary cause of a year on year adverse foreign exchange impact on the Group, which in total reduced 2007 reported operating profits compared to 2006 by £1.5 million. Net cash inflow from operating activities before taxation was £35.1 million, the eighth consecutive year it has been greater than operating profit. In 2006 we grew our Research and Development expenditure by 32 per cent and we increased it again in 2007, by a further 4 per cent to £11.3 million as we maintain focus on product leadership. At the start of 2007 we launched major product enhancements, collectively called the plus range, across a number of our businesses. During 2007 we have continued this range development process in hardware, software, consumables and services. We have also introduced products from our newer acquisitions into the Domino sales organisation and added a first thermal ink jet product into our portfolio. We have increased our investment in building a business development team in Europe and North America to focus on the emerging opportunity in Track and Trace. Revenues grew steadily in 2007, primarily in USA and UK, and opportunities are now starting to develop elsewhere in Europe and Asia. Industry has been slow to implement legislation and mandates. In some sectors and in some countries directives are now in place and this should accelerate the development of the market. We will continue to invest in this opportunity. We continue to search out opportunities to expand the Group through the addition of businesses which complement our core coding and marking business through distribution expansion or product and technology addition, or support our programme to develop a strong Integrated Solutions business, focussing on the opportunity in Track and Trace. We made two strategic acquisitions during the financial year, and a third just after our year end. In May 2007, we acquired On-Line Coding Limited, the UK distributor of Easyprint, our Thermal Transfer Overprinting (‘TTO’) business. This acquisition added additional sales and distribution skills to the Group in the largest market in Europe for this technology. In October 2007, we acquired a German software business, Control Information Technology GmbH. This is an addition to our Integrated Solutions business, providing software products and capabilities to undertake a higher degree of customisation to meet our customers’ system requirements. In November 2007, just after our year end, we acquired the assets and trade of Bopack, the former Domino distributor in Belgium and Luxembourg. We will now serve our customers in Belgium directly. Asia Once again we recorded double-digit sales growth across the region, with our Chinese and Indian businesses producing another excellent year. We remain the leading brand in both these, and other, Asian markets, with approaching 25 per cent of our Group employees located in these two major emerging industrial superpowers. We continue to encounter an ever increasing number of local competitors, but remain confident that our reputation, our product quality and range, and our superior service and support infrastructure ensures that we are well placed to exploit the growing opportunities, not only in China and India, but across the region as a whole. These core values are replicated throughout all of our businesses worldwide. Europe Sales in Europe grew by 17 per cent, 8 per cent due to acquisitions. Once again results in some of the more mature markets were subdued as the movement of production facilities to lower cost economies continues to reduce market opportunity for our products in these countries. Our businesses in Asia and Eastern Europe benefit from this trend. During the year, we have undertaken some restructuring of our European sales forces to give greater representation of our wider product portfolio. We have focussed the previously territory-aligned organisation on specific market sectors or products to exploit fully the opportunities available to us. This approach supports our positioning as a consultative, solutions provider through knowledgeable and experienced expert sales people. We will see more of this approach across the whole company in the future. Americas After a flat year in 2006, we achieved 10 per cent growth in dollar revenues in the USA in 2007. The core Domino product range sales grew modestly, but overall business was boosted by a strong year in the USA from Citronix and also good growth at Domino Integrated Solutions Group (formerly Enterprise Information Systems) as we won a number of large RFID integration projects. In a tougher market place, Commercial Printing product sales held up reasonably well, although volumes were down on recent years. Elsewhere in this region, sales moved forward positively compared to 2006, except in Canada where currency strength relative to the US dollar had a noticeable impact on investment decisions and held our business back. Product Identification (‘PI’) This was another year of market share gains for our PI business with volume growth for all three of our continuous inkjet (‘CIJ’) brands. The Domino range of products was upgraded with the introduction of the A-Series plus replacing the A-Series in many applications. The programme will continue throughout 2008 as we continue to enhance the product range for a number of niche sectors. Wiedenbach had a very successful 2007, selling in its niche market segments. Early in 2008 we will launch a new printer platform which has many enhancements and additional features which will be of significant benefit to our customers. Citronix, which we purchased in 2005, continues to be the fastest growing of our three CIJ brands. Volumes grew by over 34 per cent in 2007 and the market share of the Citronix brand increased, not only in developing countries but also more mature markets. After several years of strong printer volume growth, our installed base of CIJ products worldwide has expanded significantly, which in turn provides the Group with a healthy platform for revenue growth in fluids, spares and services. We have expanded our range of support products during 2007. We continue to invest in fluids research and development to meet the diversity of needs of the market place. Lasers The market for laser coders continues to develop at a faster pace than for CIJ products and we are well positioned to capitalise on the opportunity. Overall our volumes grew by over 28 per cent in 2007 with each of our Domino, Sator and Purex products recording excellent increases. Revenues of Purex have doubled in our three years of ownership of this company, demonstrating the positive results of building fume extraction into a source of consumable revenues and profits. Commercial Printing (‘CP’) In accordance with our stated strategy, we are deploying our inkjet product expertise into a limited number of CP market opportunities where we can deliver high value solutions to our customers. So, despite a relatively weak CP market for the past 24 months, we have been able to achieve modest growth and maintain a healthy profitability. At the end of the year, we introduced our first thermal ink jet product using third party printhead technology This product, the L-Series, is designed to meet applications in the direct mail addressing market. Thermal Transfer Overprinting (‘TTO’) The acquisition in October 2006 of Easyprint has been met with a positive reaction from our customers. During 2007, we have been developing a new range of products for sale through the Domino network. We have also increased our support to the established Easyprint distribution network. Outer Case Coding (‘OCC’) This business is now in two parts following the acquisition of Mectec in 2006. The inkjet element of the business had a further year of double-digit sales growth; with the C-Series plus proving a successful product range enhancement. We will build on this platform with more new products in 2008. Mectec, our Print and Apply Label Machinery (‘PALM’) company, had a successful first year as a member of the Group, delivering profits ahead of plan. In addition to selling the established product range through the Mectec distribution network, we now sell additional products through the Domino network and this is helping the business to grow strongly. Operations We have continued to invest in the infrastructure of the Group to provide excellent customer service in the most efficient way possible. Our customer satisfaction ratings continued to improve during 2007, from the already very high levels of previous years. Our operating units have had a busy year with a wide range of new products introduced into our factories, and this will continue in 2008. The overall conclusion for 2007 is a year of good progress. We have integrated the 2006 acquisitions successfully, and our acquisitions from 2005 and earlier all continue to perform well. We have launched the plus range into the Group. We have increased our investment in Integrated Solutions. We expect it will take a further two years before this business moves into profit. Despite significant adverse currency movements, we have produced good progression in our financial results at a time of considerable investment in the future of the Group, not only in Integrated Solutions, but also in R&D and our sales network. In conclusion, I should like to thank all our employees, over 2,100 of them spread all around the world, whose hard work, commitment and attitude makes the Domino Group a trusted partner for our customers. I should like to thank our extensive network of distributors for their loyalty and efforts, which have helped us to drive consistent growth in volumes year after year. I should like to recognise the significant contribution from our suppliers who continue to meet our production needs so reliably and help us in our extensive new product development programmes.
Nigel Bond |
