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Domino hit by TEN Media write-off

RESULTS: Domino Printing's headline profits were hit hard after its TEN Media stake was written off - but the underlying performance looks solid enough
December 20, 2013

An otherwise solid performance from specialist printer Domino Printing Sciences (DNO) was overshadowed by the need to write down its entire holding in compliance and traceability systems specialist, TEN Media. But adjust for that £30.3m hit, and other one-off items, and underlying pre-tax profit fell just 1 per cent at £53m.

IC TIP: Hold at 705p

TEN Media's supply chain systems were to have used Domino's products exclusively for coding requirements, but it has consistently failed to raise sufficient capital to commence the roll-out of its systems - hence the write-off.

Operationally, Domino's largest markets - Germany, the US and China - delivered double-digit sales growth. While, in anticipation of further digital printing growth, investment in research and development was increased 17 per cent to £19.5m and a number of printers and fluids products were launched during the year. Although sales and distribution costs rose 5 per cent to £89.3m which helped to cut the gross margin from 49.7 per cent to 48.1 per cent. Equipment sales, which generate 43 per cent of group revenue, grew 8 per cent - mostly reflecting the introduction of the N-Series full colour digital label press, of which 10 were shipped during the year. Elsewhere, revenue from spares and servicing rose 9 per cent, while consumables and fluids revenue grew 6 per cent.

Broker Investec Securities expects adjusted full-year pre-tax profit of £58.5m, giving EPS of 39p (2013: 35.3p).

DOMINO PRINTING SCIENCES (DNO)
ORD PRICE:705pMARKET VALUE:£791m
TOUCH:701-705p12-MONTH HIGH:731pLOW: 559p
DIVIDEND YIELD:3.1%PE RATIO:135
NET ASSET VALUE:177p*NET CASH:£25.5m

Year to 31 OctTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200925628.017.813.0
201030052.134.315.6
201131457.437.218.8
201231253.936.920.6
201333617.75.2221.7
% change+8-67-86+5

Ex-div: 5 Mar

Payment: 11 Apr

*Includes intangible assets of £108m or 96p a share