Domino Printing Sciences plc
Domino Printing Sciences plc Half Yearly Financial Report 2011
Domino is all about ‘doing more’. Our people share a distinctive attitude that appeals to the belief we all have in the possibilities of curious exploration, or going further. Our approach is apparent in the resourcefulness of our people in supporting customers, and in their willingness to embrace responsibility and do what’s right.
A320i With the intelligence to manage itself the latest ink jet printer reduces cost and simplifies the production line.
D-Series The latest edition of our successful compact scribing laser is designed to fit in even the smallest of spaces.
Domino is delighted to introduce intelligent Technology to maximise productivity while still delivering the impressive reliability that we’ve maintained for the last 30 years. V120i
The ease of use of the products combined with our total cost effectiveness ensures productivity, value and convenience – allowing you to do more.
CONTENTS
1 Highlights 2 Responsibility Statement 3 Interim Management Report 6 Independent Review Report to Domino Printing Sciences plc 7 Condensed Consolidated Income Statement 8 Condensed Consolidated Statement of Comprehensive Income 9 Condensed Consolidated Balance Sheet 10 Condensed Consolidated Statement of Changes in Equity 11 Condensed Consolidated Cash Flow Statement 12 Notes to the Accounts
The smart upgrade to digital coding – and the most cost-effective solution for flexible packaging in its class.
1
Domino Printing Sciences plc Half Yearly Financial Report 2011
HIGHLIGHTS Half year ended 30 April 2011
SOLID PERFORMANCE AND INVESTMENT FOR FUTURE GROWTH • Strong growth in Thermal Transfer and Thermal Inkjet products • Successful introduction of new Continuous Ink Jet and Laser printer ranges • Profit before tax of £27.1 million, 13 per cent ahead of prior year • Investment in sales capacity supports future growth opportunities • Investment in Research and Development increased by 12 per cent • Investment of $50 million in TEN Media; focus on food safety • Interim dividend increased by 20 per cent to 6.58 pence
Revenue Profit before tax Underlying profit before tax (note 10) Net cash inflow from operating activities before tax Earnings per share Underlying earnings per share (note 2) Interim dividend per share
Half year to 30.04.2011
Half year to 30.04.2010
Change
£156.4m £27.1m £28.2m £15.7m 17.24p 17.98p 6.58p
£144.8m £23.9m £25.1m £27.8m 15.45p 16.35p 5.48p
+8% +13% +12% -44% +12% +10% +20%
Peter Byrom, Chairman, commented “I am pleased to report an increase in sales of 8 per cent against a strong prior year comparative. Volumes of our newer technology products, Thermal Transfer and Thermal Inkjet, were both significantly ahead of last year and sales of our new Continuous Inkjet and Laser printers have made good progress since their full launch at the end of the first quarter. Demand for our fluids, consumables and other after market products remains strong. “We have invested in 100 new sales, marketing and service personnel over the last twelve months, increasing the capacity of our sales channels to sell and support our new printer ranges. We have continued to invest in Research and Development and, following the successful debut of our new printer ranges in Paris earlier in the financial year, we introduced further new products in early May at Interpack, the major international packaging show in Germany. “Many countries are now either introducing or contemplating new legislation aimed at food safety. In April we announced an investment in TEN Media, a company established with our partners NewMarket Impressions to develop and supply compliance and food safety systems to the fresh egg industry. We are excited by this opportunity and the potential for the further development of compliance systems for use across the fresh produce sector. “While there remain some uncertainties in global economies we continue to see customers invest and believe we are well placed to develop and grow the business. The Board remains confident in the prospects for the Group.”
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Domino Printing Sciences plc Half Yearly Financial Report 2011
R esponsibilit y S tatement
We confirm to the best of our knowledge: a) the condensed set of financial statements have been prepared in accordance with IAS 34, ‘Interim Financial Reporting’; b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties’ transactions and changes therein). By order of the Board
Nigel Bond Group Managing Director 21 June 2011
Andrew Herbert Group Finance Director 21 June 2011
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Domino Printing Sciences plc Half Yearly Financial Report 2011
I N T E R I M M A N AG E M E N T R E P O RT To the members of Domino Printing Sciences plc
Cautionary statement This Interim Management Report (‘IMR’) has been prepared solely to provide additional information to shareholders to enable them to assess the Group’s strategies and potential for those strategies to succeed. The IMR should not be relied upon by any other party or for any other purpose. The IMR contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information. This IMR has been prepared for the Group as a whole and therefore emphasises those matters which are significant to Domino Printing Sciences plc and its subsidiary undertakings when viewed as a whole. Long term strategy and business objective The Domino Group (‘Domino’) is a world leading supplier of coding and marking products and provides a broad range of solutions to meet customers’ needs for product identification and traceability. Our strategy is to continue to build the Group’s product portfolio through innovation and acquisition and to provide our global customer base with superior products supported by the most comprehensive service and after sales infrastructure in our industry. Domino designs, develops and manufactures industrial coding, marking, labelling and printing equipment for the high speed printing of variable information onto products and packaging. Our industry-leading product range includes printers, controllers, consumables and fluids for a broad spectrum of materials, as well as high quality after sales support and customer care. Around 40 per cent of the Group’s revenues come from sales of new equipment, the balance being generated from consumables and services to the customers using our equipment. The Group’s products are sold worldwide; we have representation in over 120 countries. Approximately 45 per cent of the Group’s turnover is in Europe, 35 per cent in Asia and Africa and 20 per cent in the Americas. We serve customers in a broad range of market sectors.
Operating results Sales increased by 8 per cent in the six months ended 30 April 2011 as compared to the same period last year. There was no material impact from exchange rates on reported sales. Demand for our products and services has remained strong and initial sales of our new printer ranges, introduced in late November 2010, have been in line with our expectations. Equipment volumes grew by 6 per cent against a strong comparative. In the corresponding period last year overall equipment volumes increased by over 30 per cent as the business recovered from the recessionary period of 2009. We are particularly pleased with the continuing progress of our newer technology products with both Thermal Transfer and Thermal Inkjet printer volumes recording strong growth. Consumables revenue increased by 10 per cent in the period and spares and service revenue growth was 9 per cent. Demand for these after market products typically tracks closely our installed base of printers and customer output levels, both of which have shown increases on prior year. The Group continues to make good progress in most geographic regions. Sales in Europe have grown by 10 per cent on the same period last year and in the Middle East and Asia, despite the impact of both natural disasters and political events, revenues have increased by 18 per cent. Sales in the Americas were 8 per cent below the prior year. A one-off sale in the first quarter of 2010 in South America was not repeated, holding back growth in that region and total revenues in the USA, where commercial printing markets remain depressed, declined by 6 per cent. The rate of gross margin for the half year improved to 49.8 per cent compared to 48.9 per cent last year. We continue to benefit from the positive effects of consolidation of our manufacturing operations as production volumes increase. Average selling prices to customers have been relatively stable. Some raw material costs have suffered inflationary increases but the slight weakening of Sterling over the period has mitigated any material impact on gross margin rates. There has been volatility in the price of solvents used in some of the Group’s fluids range resulting from reduced global supply capacity following the earthquake in Japan earlier in the year. To date we have not identified any other material impact on our business from the disruption in Fukushima.
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Domino Printing Sciences plc Half Yearly Financial Report 2011
I N T E R I M M A N AG E M E N T R E P O RT To the members of Domino Printing Sciences plc continued Selling, distribution and administration expenses increased by 8 per cent on prior year. We have increased our headcount in sales, marketing and service by 100 personnel over the past twelve months. This increased capacity is helping to drive volumes of our new products and we expect some acceleration of growth in equipment volumes in future months as a result. One specific area of investment has been in a team to develop new market opportunities in digital printing and we were pleased to take the first orders for our new digital press product in the period. Expenditure on Research and Development was increased by 12 per cent. In addition to the products introduced in Paris last November, we launched two further new products at the recent Interpack exhibition in Germany. The work we have been undertaking on developing common platforms is expected to result in a further range of new products. Currency rates have impacted the reported profits of the business over the past six months. Translation of overseas profits, translation of short term balances denominated in foreign currencies and the impact from forward contracts (when compared to prior year contract rates) have reduced reported profits by £2.0 million compared to the result had we reported at exchange rates consistent with the same period last year. Operating profit before amortisation of acquired intangible assets was £28.1 million, an increase of 12 per cent on prior year. Profit before tax was £27.1 million, 13 per cent ahead of prior year. Group underlying profit before tax (see note 10) was £28.2 million, 12 per cent ahead of prior year. This represents a return on sales of 18.0 per cent, maintaining the improvement established in 2010. We have estimated an effective tax rate of 30.3 per cent for the year. Profits after tax were £18.9 million. TEN Media We announced in April that the Group has entered into a partnership with NewMarket Impressions, a US based business, in the formation of a new company, TEN Media, to provide safety systems for the fresh egg industry. TEN Media provides coding based solutions that enable full traceability of eggs through the supply chain and assure compliance with legislation aimed at disease prevention. Initially focused on the large US egg market, TEN Media intends to expand into other markets over time. The Group made an
investment of $50 million (£30.3 million) for a 15 per cent share in the company. Domino has exclusive supply agreements with TEN Media for all coding equipment and services. Dividends The interim dividend has been increased by 20 per cent to 6.58 pence per share (2010: 5.48 pence). Cash Net cash inflow from operating activities before tax was £15.7 million (see note 8). Inventory increased by £4.3 million as the introduction of a range of new products over the period led to a temporary increase in stock in the factories, and debtors increased by £6.8 million in line with sales. Creditors decreased by £5.1 million over the period as bonuses charged against prior year profits were paid and timing of trade creditor payments resulted in a reduction in short term creditor balances compared to the same period last year. Investment in fixed assets including tooling for new products was £4.2 million. In addition to the investment of £30.3 million in TEN Media, cash of £3.3 million was used to pay contingent consideration earned on acquisitions made in earlier years. Dividend payments totalling £11.1 million were made in the period. Net cash and cash equivalents, after deducting short term debt, was £12.0 million. Related party transactions Related party transactions are disclosed in note 9. There has been no material change in the nature or scale of related party transactions described in the last annual report. Risk management The Group has an established risk management process. Risks and uncertainties are assessed and formally evaluated across the business and actions are taken to mitigate the adverse effects of unplanned events. The Group operates a Risk Management Committee comprising a cross functional team of senior executives with responsibility to ensure management are identifying, acting upon and monitoring risks. The Group’s Internal Audit function undertakes formal risk assessments as a part of the review of subsidiary operations across the Group. The Board receives regular reports on the maintenance of controls and formally reviews risk management policy annually. The key risks to which the business is exposed are included on page 20 of our latest annual report. These
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Domino Printing Sciences plc Half Yearly Financial Report 2011
I N T E R I M M A N AG E M E N T R E P O RT To the members of Domino Printing Sciences plc continued have not changed significantly over the past six months and are not expected to do so over the remaining six months of the financial year. The Group has taken a 15% stake in TEN Media. The business is in its early stages of start up and therefore has exposure to risks of competition and market acceptance. Going concern The Group is cash positive and has committed debt facilities which run to the end of 2011. The Board intends to negotiate new committed debt facilities before or upon expiry of existing arrangements. The business of the Group is widely spread, both geographically and by market sector. The breadth and longevity of customer relationships which arise from the ongoing supply of products and services, means the Group remains well placed to manage its business risks successfully despite the current uncertain economic outlook. After making enquiries, the directors have a reasonable expectation that the Company and Group have adequate resources to continue to operate for the foreseeable future. The directors have also considered the Group’s forecasts and projections. Accordingly, the going concern basis has been adopted in the preparation of the half yearly financial report.
Outlook Trading was in line with our expectations in the first half year. We are pleased with the progress we have made in the introduction of new products and expect our investments in incremental sales and service resources to provide the capacity necessary to enable future growth. Continuing uncertainties surrounding sovereign debt and political changes in some countries mean we remain cautious on the global economy, but we continue to see customers investing, fuelling strong demand for our products. We are excited by the potential opportunities developing through TEN Media and expect first sales to take place next year. We believe the development of food safety legislation will continue and that our coding solutions will remain an integral part of necessary compliance systems. The Board remains confident in the prospects for the Group.
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Domino Printing Sciences plc Half Yearly Financial Report 2011
I N D E P E N D E N T R E V I E W R E P O RT To Domino Printing Sciences plc
We have been engaged by the Company to review the condensed set of financial statements in the half yearly financial report for the six months ended 30 April 2011 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 11. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’, issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed. Directors’ responsibilities The half yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom’s Financial Services Authority. As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union.
Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half yearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’, issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half yearly financial report for the six months ended 30 April 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom’s Financial Services Authority. Deloitte LLP Chartered Accountants and Statutory Auditors Cambridge, United Kingdom 21 June 2011
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Domino Printing Sciences plc Half Yearly Financial Report 2011
C ondensed C onsolidated I ncome S tatement FOR THE HALF YEAR ENDED 31 APRIL 2011
Half year to 30.4.11 Reviewed Total
Continuing operations
Note
£000
Half year to 30.4.10 Reviewed Total
Year to 31.10.10 Audited Total
£000
£000
Revenue 3 Cost of sales
156,350 (78,488)
144,826 300,006 (74,056) (150,953)
Gross profit Selling and distribution costs Administrative expenses Research and development
77,862 (26,938) (15,885) (7,897)
70,770 (23,871) (15,761) (7,069)
149,053 (49,450) (31,595) (15,592)
Operating profit 4 Investment income Finance costs
27,142 235 (241)
24,069 163 (359)
52,416 418 (688)
Profit before taxation Taxation
27,136 (8,228)
23,873 (7,110)
52,146 (14,915)
Profit for the period
18,908
16,763
37,231
Attributable to: Equity shareholders of the Company Non-controlling interest
18,829 79
16,694 69
37,130 101
18,908
16,763
37,231
Basic earnings per share (pence) Diluted earnings per share (pence)
17.24p 16.99p
15.45p 15.32p
34.25p 33.88p
3 5
2 2
8
Domino Printing Sciences plc Half Yearly Financial Report 2011
C ondensed C onsolidated S tatement o f C omprehensive I ncome FOR THE HALF YEAR ENDED 31 APRIL 2011 Half year to 30.4.11 Reviewed £000
Profit for the period Currency translation differences on foreign currency net investments (Losses)/gains on cash flow hedges Tax on items taken directly to equity
18,908 477 (42) –
Half year to 30.4.10 Reviewed £000
Year to 31.10.10 Audited £000
16,763
37,231
2,486 294 –
1,590 724 948
Total comprehensive income for the period
19,343
19,543
40,493
Attributable to: Equity shareholders of the Company Non-controlling interest
19,264 79
19,474 69
40,392 101
19,343
19,543
40,493
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Domino Printing Sciences plc Half Yearly Financial Report 2011
C ondensed C onsolidated B alance S heet As at 30 April 2011
30.4.11 Reviewed £000
30.4.10 Reviewed £000
31.10.10 Audited £000
Non-current assets Goodwill Other intangible assets Property, plant and equipment Available for sale investments Investment in associate Deferred tax assets
71,135 10,539 25,664 32,017 287 9,166
68,424 12,426 25,029 1,735 216 7,866
70,161 11,040 24,832 1,734 225 8,504
148,808
115,696
116,496
Current assets Inventories Trade and other receivables Cash and cash equivalents Financial instruments
34,414 61,381 39,878 524
27,894 55,669 45,117 175
30,758 55,038 59,167 348
136,197
128,855
145,311
Current liabilities Bank loans and overdrafts Trade and other payables Financial instruments
(27,881) (64,911) (376)
(9,715) (65,749) (414)
(9,683) (67,932) (158)
(93,168)
(75,878)
(77,773)
Net current assets
43,029
52,977
67,538
Non-current liabilities Deferred tax liabilities Other payables
(6,120) (2,884)
(6,557) (7,484)
(6,504) (6,473)
(9,004)
(14,041)
(12,977)
Net assets
182,833
154,632
171,057
Equity share capital Own shares Share premium account Capital redemption reserve Revaluation reserve Taxation reserve Exchange reserve Retained earnings
5,543 (3,327) 36,078 908 898 1,781 14,939 125,660
5,501 (3,425) 33,729 908 898 5 15,280 101,482
5,514 (3,437) 34,381 908 891 953 14,504 117,069
Equity attributable to shareholders of the Company
182,480
154,378
170,783
Non-controlling interest
353
254
274
Total equity
182,833
154,632
171,057
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Domino Printing Sciences plc Half Yearly Financial Report 2011
C ondensed C onsolidated S tatement o f C hanges in E q u it y
Investment in own shares £000
At 1 November 2010 (3,437) Profit for the period – Other comprehensive income for the period – Total comprehensive income for the period Shares issued during the period Shares awarded to share scheme participants Own shares acquired Withdrawal of SIP matching shares Reversal of share–based compensation charges Deferred tax on share based payment transactions Dividends (note 6) Transfer of amount equivalent to additional depreciation on revalued assets At 30 April 2011
Non– controlling interest £000
Total Equity £000
34,381 –
908 –
891 –
953 –
14,504 –
117,069 18,829
170,783 18,829
274 79
171,057 18,908
–
–
–
–
–
435
–
435
–
435
–
–
–
–
–
–
435
18,829
19,264
79
19,343
–
29
1,697
–
–
–
–
–
1,726
–
1,726
117 (34)
– –
– –
– –
– –
– –
– –
– –
117 (34)
– –
117 (34)
27
–
–
–
–
–
–
–
27
–
27
–
–
–
–
–
–
–
902
902
–
902
– –
– –
– –
– –
– –
828 –
– –
– (11,133)
–
(7)
–
Investment in own shares £000
At 1 November 2009 (3,783) Profit for the period – Other comprehensive income for the period –
At 30 April 2010
Share Capital premium redemption Revaluation Taxation Exchange Retained account reserve reserve reserve reserve earnings Total £000 £000 £000 £000 £000 £000 £000
5,514 –
(3,327)
Total comprehensive income for the period Shares issued during the period Shares awarded to share scheme participants Own shares acquired Withdrawal of SIP matching shares Reversal of share based compensation charges Dividends (note 6) Transfer of amount equivalent to additional depreciation on revalued assets
Called-up share capital £000
–
–
–
7
–
5,543
36,078
908
898
1,781
Called-up share capital £000
828 (11,133)
–
14,939 125,660 182,480
Share Capital premium redemption Revaluation Taxation Exchange Retained account reserve reserve reserve reserve earnings Total £000 £000 £000 £000 £000 £000 £000
– –
–
828 (11,133)
–
353 182,833 Non– controlling interest £000
Total Equity £000
5,467 –
32,226 –
908 –
904 –
5 –
12,500 –
93,642 16,694
141,869 16,694
185 69
142,054 16,763
–
–
–
–
–
2,780
–
2,780
–
2,780
–
–
–
–
–
–
2,780
16,694
19,474
69
19,543
–
34
1,503
–
–
–
–
–
1,537
–
1,537
308 (32)
– –
– –
– –
– –
– –
– –
82
–
–
–
–
–
–
– –
– –
– –
– –
– –
– –
– –
–
(3,425)
–
–
–
5,501
33,729
908
(6) 898
– 5
–
(308) – – 620 (9,172)
6
– (32)
– –
– (32)
82
–
82
620 (9,172)
–
15,280 101,482 154,378
– –
–
620 (9,172)
–
254 154,632
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Domino Printing Sciences plc Half Yearly Financial Report 2011
C ondensed C onsolidated C ash Flow S tatement FOR THE HALF YEAR ENDED 31 APRIL 2011 Half year to 30.4.11 Reviewed £000
Half year to 30.4.10 Reviewed £000
Year to 31.10.10 Audited £000
9,244
23,506
47,083
235 (112) 31 (3,941) – (296) (3,303) (26) (30,283)
163 (144) 155 (2,283) – (24) (7,827) – (250)
418 (260) 192 (5,502) 10 (217) (7,718) – (250)
(37,695)
(10,210)
(13,327)
(11,133) 18,730 (65) (43) (34) 1,843
(9,172) – (365) (29) (32) 1,537
(15,163) – (737) (73) (65) 2,202
Net cash from/(used in) financing activities Effects of foreign exchange on cash balances
9,298
(8,061)
(13,836)
(135)
842
235
Net (decrease)/increase in cash and cash equivalents
(19,288)
6,077
20,155
Net cash inflow from operating activities (see note 8) Investing activities Interest received Interest paid Proceeds on disposal of property, plant and equipment Purchase of property, plant and equipment Proceeds on disposal of intangible assets Purchase of intangible assets Payment of contingent acquisition consideration Investments in associates Purchase of available for sale investments Net cash used in investing activities Financing activities Dividends paid New bank loans raised Repayment of borrowings Repayment of obligations under finance leases Own shares purchased Issue of equity share capital
Cash and cash equivalents at beginning of period
59,166
39,011
39,011
Cash and cash equivalents at end of period
39,878
45,088
59,166
Comprising: Cash and cash equivalents Bank overdrafts
39,878 –
45,117 (29)
59,167 (1)
39,878
45,088
59,166
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Domino Printing Sciences plc Half Yearly Financial Report 2011
N OTE S TO TH E ACcO U NT S FOR THE HALF YEAR ENDED 31 APRIL 2011
1. Accounting policies The annual financial statements of Domino Printing Sciences plc are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union. The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group’s latest annual audited financial statements, except as described below. In the current financial year, various accounting standards have become effective. These include amended accounting standards resulting from annual improvements to IFRSs, as well as IFRS 1 (amended 2009), ‘First-Time Adoption of International Financial Reporting Standards’, IFRS 1 (amended 2010), ‘First-Time Adoption of International Financial Reporting Standards’, IFRS 2 (amended 2009), ‘Share Based Payment’ and IAS 32 (amended 2009), ‘Financial Instruments: Presentation’. In addition, one interpretation issued by the International Financial Reporting Interpretations Committee has become effective in the current period (IFRIC 19, ‘Extinguishing Financial Liabilities with Equity Instruments’). There have been no material changes to the Group’s accounting policies as a result of the Group’s adoption of these Standards and Interpretations. General information The interim financial information has not been audited but has been reviewed by the auditor in accordance with ISRE 2410 issued by the Auditing Practices Board. The information for the year ended 31 October 2010 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor’s report on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s498 (2) or (3) of the Companies Act 2006. 2. Earnings per share Earnings per share are calculated by dividing the profit on ordinary activities attributable to shareholders by the weighted average number of shares in issue during the period (110,555,388) less the weighted average shares in the Company purchased by the Company’s Employment Benefit Trust (1,226,592) less the weighted average shares issued to the Company’s QUEST scheme (35,867) less the weighted average shares held to satisfy the Group’s Share Incentive Plan obligations (101,861). The weighted average number of shares used, therefore, is 109,191,068 (Half year to 30 April 2010: 108,082,553, Year to 31 October 2010: 108,416,060). The weighted average number of shares used in the diluted earnings per share calculation is the figure used in the basic earnings per share calculation adjusted by 1,630,034 (Half year to 30 April 2010: 917,994, Year to 31 October 2010: 1,191,577), being the number of shares deemed to be issued for no consideration if all share options had been exercised. The weighted average number of shares used, therefore, is 110,821,102 (Half year to 30 April 2010: 109,000,547, Year to 31 October 2010: 109,607,637). The earnings used in the diluted earnings per share calculation are the profit on ordinary activities attributable to shareholders. The Group presents an alternative measure of earnings per share before the post-tax effects of: • amortisation of intangible assets arising on business combinations (Half year to 30 April 2011: £678,000, Half year to 30 April 2010: £761,000, Year to 31 October 2010: £1,527,000); • any exceptional costs incurred in the period (Half year to 30 April 2011: £nil, Half year to 30 April 2010: £nil, Year to 31 October 2010: £nil); and • the notional, non-cash interest charge on discounted long term contingent consideration (Half year to 30 April 2011: £129,000, Half year to 30 April 2010: £214,000, Year to 31 October 2010: £430,000). The effect of the above items on basic earnings per share is presented below: Half year to 30.4.11 Reviewed
Half year to 30.4.10 Reviewed
Year to 31.10.10 Audited
Basic earnings per share (pence) Effect of acquired intangibles amortisation (pence) Effect of notional interest charge on discounted contingent consideration (pence)
17.24 0.62 0.12
15.45 0.70 0.20
34.25 1.40 0.40
Underlying earnings per share (pence)
17.98
16.35
36.05
Underlying diluted earnings per share (pence)
17.72
16.21
35.66
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Domino Printing Sciences plc Half Yearly Financial Report 2011
N OTE S TO TH E ACcO U NT S FOR THE HALF YEAR ENDED 31 APRIL 2011 continued 3. Segment reporting For the purposes of reporting to the Board of Directors, the Group’s operations are categorised by location of subsidiary. Half year to 30.4.11 Reviewed £000
Half year to 30.4.10 Reviewed £000
Year to 31.10.10 Audited £000
External revenue by location of subsidiary Europe Americas Rest of the World
92,497 29,318 34,535
86,217 29,250 29,359
175,388 63,358 61,260
156,350
144,826
300,006
Segment result by location of subsidiary Europe Americas Rest of the World Eliminations
25,333 2,071 8,879 (1,244)
21,774 1,475 7,954 (65)
48,611 6,094 16,716 (3,413)
Central research and development
35,039 (7,897)
31,138 (7,069)
68,008 (15,592)
Operating profit Net interest
27,142 (6)
24,069 (196)
52,416 (270)
Profit before taxation
27,136
23,873
52,146
Segment assets by location of subsidiary Europe 398,769 361,931 394,788 Americas 42,080 43,723 46,586 Rest of the World 35,449 35,530 30,957 Eliminations (191,293) (196,633) (210,524)
285,005
244,551
261,807
Segment liabilities by location of subsidiary Europe (167,485) (158,366) (175,626) Americas (28,904) (33,957) (34,626) Rest of the World (14,982) (16,210) (17,317) Eliminations 109,199 118,614 136,819 (102,172)
(89,919)
(90,750)
4. Operating profit Operating profit for the half year to 30 April 2011 is stated after charging £916,000 amortisation of acquired intangible assets (Half year to 30 April 2010: £1,057,000). Operating profit for the full year ended 31 October 2010 includes amortisation of acquired intangibles of £2,092,000. 5. Taxation Tax for the period is charged at a composite tax rate of 30.3 per cent (Half year to 30 April 2010: 29.8 per cent, Year to 31 October 2010: 28.6 per cent), representing the best estimate of the average annual effective income tax rate expected for the full year.
14
Domino Printing Sciences plc Half Yearly Financial Report 2011
N OTE S TO TH E ACcO U NT S FOR THE HALF YEAR ENDED 31 APRIL 2011 continued 6. Dividends Half year to 30.4.11 Reviewed £000
Half year to 30.4.10 Reviewed £000
Year to 31.10.10 Audited £000
Amounts recognised as distributions in the period: Final dividend for the year ended 31 October 2010 of 10.14 pence per share (2009: 8.45 pence) Interim dividend for the year ended 31 October 2010 of 5.48 pence per share (2009: 4.57 pence)
11,133 –
9,172 –
9,172 5,979
Distributions to non-controlling interests
11,133 –
9,172 –
15,151 12
11,133
9,172
15,163
The interim dividend of 6.58 pence per share has been approved by the Board and will be paid on 19 August 2011 to shareholders on the register at close of business on 15 July 2011. The interim dividend has not been included as a liability at 30 April 2011. 7. Share capital During the six months ended 30 April 2011 a total of 592,565 new ordinary shares of 5p each were issued under the Company’s Executive and Savings Related Option Schemes for £1,726,000. 8. Net cash inflow from operating activities Half year to 30.4.11 Reviewed £000
Half year to 30.4.10 Reviewed £000
Year to 31.10.10 Audited £000
Operating profit
27,142
24,069
52,416
Depreciation of property, plant and equipment Amortisation of intangible assets acquired through business combination Amortisation of other intangible assets Share based compensation charges Increase in inventories* Increase in receivables* (Decrease)/increase in payables* Decrease in restructuring and redundancy provisions Non-cash write down of goodwill and acquisition intangibles* Other non-cash items
2,730
2,612
5,329
916 97 902 (4,311) (6,828) (5,074) – – 155
1,057 74 620 (1,717) (6,517) 8,963 (1,286) – (38)
2,092 172 1,433 (4,011) (5,440) 9,050 (2,069) 448 271
Net cash inflow from operating activities before taxation Tax paid
15,729 (6,485)
27,837 (4,331)
59,691 (12,608)
Net cash inflow from operating activities
9,244
23,506
47,083
* Net of effect of change in exchange rates.
9. Related party transactions Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this statement. Transactions between the Group and its associates are disclosed below. During the period, Group companies entered into the following transactions with related parties who are not members of the Group: Sale Purchase of goods of goods Associate – Mectec BV £000 £000
Six months ended 30 April 2011 Year ended 31 October 2010 Six months ended 30 April 2010
293 532 276
124 54 42
Amounts owed to related parties £000
Amounts owed by related parties £000
12 – 7
47 106 56
15
Domino Printing Sciences plc Half Yearly Financial Report 2011
N OTE S TO TH E ACcO U NT S FOR THE HALF YEAR ENDED 31 APRIL 2011 continued Sale Purchase of goods of goods Associate – Mectec BVBA £000 £000
Six months ended 30 April 2011 Year ended 31 October 2010 Six months ended 30 April 2010
74 70 –
– – –
Amounts owed to related parties £000
Amounts owed by related parties £000
– – –
26 39 –
Sale of goods to related parties were made at the Group’s usual list prices. Purchases were made at market price discounted to reflect the quantity of goods purchased and the relationships between the parties. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties. 10. Underlying profit before tax Underlying profit before taxation is £28,181,000 (Half year to 30 April 2010: £25,144,000, Year to 31 October 2010: £54,668,000) comprising:
Half year to 30.4.11 Reviewed £000
Half year to 30.4.10 Reviewed £000
Year to 31.10.10 Audited £000
Profit before taxation Amortisation of acquired intangibles Interest charge on discounted contingent consideration
27,136 916 129
23,873 1,057 214
52,146 2,092 430
28,181
25,144
54,668
11. Investment in available for sale asset In April 2011, the Group announced that it had entered into a partnership with NewMarket Impressions, a US based business, in the formation of a new company, TEN Media, to provide safety systems for the fresh egg industry. The Group made an investment of $50 million (£30.3 million) for a 15 per cent share in the company and has exclusive supply agreements with TEN Media for all coding equipment and services.
Domino Printing Sciences plc Trafalgar Way Bar Hill Cambridge CB23 8TU T +44 (0) 1954 782 551 F +44 (0) 1954 782 874
www.domino-printing.com
Domino is all about ‘doing more’. Our people share a distinctive attitude that appeals to the belief we all have in the possibilities of curious exploration, or going further. Our approach is apparent in the resourcefulness of our people in supporting customers, and in their willingness to embrace responsibility and do what’s right.
A320i With the intelligence to manage itself the latest ink jet printer reduces cost and simplifies the production line.
D-Series The latest edition of our successful compact scribing laser is designed to fit in even the smallest of spaces.
Domino is delighted to introduce intelligent Technology to maximise productivity while still delivering the impressive reliability that we’ve maintained for the last 30 years. V120i
The ease of use of the products combined with our total cost effectiveness ensures productivity, value and convenience – allowing you to do more.
CONTENTS
1 Highlights 2 Responsibility Statement 3 Interim Management Report 6 Independent Review Report to Domino Printing Sciences plc 7 Condensed Consolidated Income Statement 8 Condensed Consolidated Statement of Comprehensive Income 9 Condensed Consolidated Balance Sheet 10 Condensed Consolidated Statement of Changes in Equity 11 Condensed Consolidated Cash Flow Statement 12 Notes to the Accounts
The smart upgrade to digital coding – and the most cost-effective solution for flexible packaging in its class.
1
Domino Printing Sciences plc Half Yearly Financial Report 2011
HIGHLIGHTS Half year ended 30 April 2011
SOLID PERFORMANCE AND INVESTMENT FOR FUTURE GROWTH • Strong growth in Thermal Transfer and Thermal Inkjet products • Successful introduction of new Continuous Ink Jet and Laser printer ranges • Profit before tax of £27.1 million, 13 per cent ahead of prior year • Investment in sales capacity supports future growth opportunities • Investment in Research and Development increased by 12 per cent • Investment of $50 million in TEN Media; focus on food safety • Interim dividend increased by 20 per cent to 6.58 pence
Revenue Profit before tax Underlying profit before tax (note 10) Net cash inflow from operating activities before tax Earnings per share Underlying earnings per share (note 2) Interim dividend per share
Half year to 30.04.2011
Half year to 30.04.2010
Change
£156.4m £27.1m £28.2m £15.7m 17.24p 17.98p 6.58p
£144.8m £23.9m £25.1m £27.8m 15.45p 16.35p 5.48p
+8% +13% +12% -44% +12% +10% +20%
Peter Byrom, Chairman, commented “I am pleased to report an increase in sales of 8 per cent against a strong prior year comparative. Volumes of our newer technology products, Thermal Transfer and Thermal Inkjet, were both significantly ahead of last year and sales of our new Continuous Inkjet and Laser printers have made good progress since their full launch at the end of the first quarter. Demand for our fluids, consumables and other after market products remains strong. “We have invested in 100 new sales, marketing and service personnel over the last twelve months, increasing the capacity of our sales channels to sell and support our new printer ranges. We have continued to invest in Research and Development and, following the successful debut of our new printer ranges in Paris earlier in the financial year, we introduced further new products in early May at Interpack, the major international packaging show in Germany. “Many countries are now either introducing or contemplating new legislation aimed at food safety. In April we announced an investment in TEN Media, a company established with our partners NewMarket Impressions to develop and supply compliance and food safety systems to the fresh egg industry. We are excited by this opportunity and the potential for the further development of compliance systems for use across the fresh produce sector. “While there remain some uncertainties in global economies we continue to see customers invest and believe we are well placed to develop and grow the business. The Board remains confident in the prospects for the Group.”
2
Domino Printing Sciences plc Half Yearly Financial Report 2011
R esponsibilit y S tatement
We confirm to the best of our knowledge: a) the condensed set of financial statements have been prepared in accordance with IAS 34, ‘Interim Financial Reporting’; b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties’ transactions and changes therein). By order of the Board
Nigel Bond Group Managing Director 21 June 2011
Andrew Herbert Group Finance Director 21 June 2011
3
Domino Printing Sciences plc Half Yearly Financial Report 2011
I N T E R I M M A N AG E M E N T R E P O RT To the members of Domino Printing Sciences plc
Cautionary statement This Interim Management Report (‘IMR’) has been prepared solely to provide additional information to shareholders to enable them to assess the Group’s strategies and potential for those strategies to succeed. The IMR should not be relied upon by any other party or for any other purpose. The IMR contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information. This IMR has been prepared for the Group as a whole and therefore emphasises those matters which are significant to Domino Printing Sciences plc and its subsidiary undertakings when viewed as a whole. Long term strategy and business objective The Domino Group (‘Domino’) is a world leading supplier of coding and marking products and provides a broad range of solutions to meet customers’ needs for product identification and traceability. Our strategy is to continue to build the Group’s product portfolio through innovation and acquisition and to provide our global customer base with superior products supported by the most comprehensive service and after sales infrastructure in our industry. Domino designs, develops and manufactures industrial coding, marking, labelling and printing equipment for the high speed printing of variable information onto products and packaging. Our industry-leading product range includes printers, controllers, consumables and fluids for a broad spectrum of materials, as well as high quality after sales support and customer care. Around 40 per cent of the Group’s revenues come from sales of new equipment, the balance being generated from consumables and services to the customers using our equipment. The Group’s products are sold worldwide; we have representation in over 120 countries. Approximately 45 per cent of the Group’s turnover is in Europe, 35 per cent in Asia and Africa and 20 per cent in the Americas. We serve customers in a broad range of market sectors.
Operating results Sales increased by 8 per cent in the six months ended 30 April 2011 as compared to the same period last year. There was no material impact from exchange rates on reported sales. Demand for our products and services has remained strong and initial sales of our new printer ranges, introduced in late November 2010, have been in line with our expectations. Equipment volumes grew by 6 per cent against a strong comparative. In the corresponding period last year overall equipment volumes increased by over 30 per cent as the business recovered from the recessionary period of 2009. We are particularly pleased with the continuing progress of our newer technology products with both Thermal Transfer and Thermal Inkjet printer volumes recording strong growth. Consumables revenue increased by 10 per cent in the period and spares and service revenue growth was 9 per cent. Demand for these after market products typically tracks closely our installed base of printers and customer output levels, both of which have shown increases on prior year. The Group continues to make good progress in most geographic regions. Sales in Europe have grown by 10 per cent on the same period last year and in the Middle East and Asia, despite the impact of both natural disasters and political events, revenues have increased by 18 per cent. Sales in the Americas were 8 per cent below the prior year. A one-off sale in the first quarter of 2010 in South America was not repeated, holding back growth in that region and total revenues in the USA, where commercial printing markets remain depressed, declined by 6 per cent. The rate of gross margin for the half year improved to 49.8 per cent compared to 48.9 per cent last year. We continue to benefit from the positive effects of consolidation of our manufacturing operations as production volumes increase. Average selling prices to customers have been relatively stable. Some raw material costs have suffered inflationary increases but the slight weakening of Sterling over the period has mitigated any material impact on gross margin rates. There has been volatility in the price of solvents used in some of the Group’s fluids range resulting from reduced global supply capacity following the earthquake in Japan earlier in the year. To date we have not identified any other material impact on our business from the disruption in Fukushima.
4
Domino Printing Sciences plc Half Yearly Financial Report 2011
I N T E R I M M A N AG E M E N T R E P O RT To the members of Domino Printing Sciences plc continued Selling, distribution and administration expenses increased by 8 per cent on prior year. We have increased our headcount in sales, marketing and service by 100 personnel over the past twelve months. This increased capacity is helping to drive volumes of our new products and we expect some acceleration of growth in equipment volumes in future months as a result. One specific area of investment has been in a team to develop new market opportunities in digital printing and we were pleased to take the first orders for our new digital press product in the period. Expenditure on Research and Development was increased by 12 per cent. In addition to the products introduced in Paris last November, we launched two further new products at the recent Interpack exhibition in Germany. The work we have been undertaking on developing common platforms is expected to result in a further range of new products. Currency rates have impacted the reported profits of the business over the past six months. Translation of overseas profits, translation of short term balances denominated in foreign currencies and the impact from forward contracts (when compared to prior year contract rates) have reduced reported profits by £2.0 million compared to the result had we reported at exchange rates consistent with the same period last year. Operating profit before amortisation of acquired intangible assets was £28.1 million, an increase of 12 per cent on prior year. Profit before tax was £27.1 million, 13 per cent ahead of prior year. Group underlying profit before tax (see note 10) was £28.2 million, 12 per cent ahead of prior year. This represents a return on sales of 18.0 per cent, maintaining the improvement established in 2010. We have estimated an effective tax rate of 30.3 per cent for the year. Profits after tax were £18.9 million. TEN Media We announced in April that the Group has entered into a partnership with NewMarket Impressions, a US based business, in the formation of a new company, TEN Media, to provide safety systems for the fresh egg industry. TEN Media provides coding based solutions that enable full traceability of eggs through the supply chain and assure compliance with legislation aimed at disease prevention. Initially focused on the large US egg market, TEN Media intends to expand into other markets over time. The Group made an
investment of $50 million (£30.3 million) for a 15 per cent share in the company. Domino has exclusive supply agreements with TEN Media for all coding equipment and services. Dividends The interim dividend has been increased by 20 per cent to 6.58 pence per share (2010: 5.48 pence). Cash Net cash inflow from operating activities before tax was £15.7 million (see note 8). Inventory increased by £4.3 million as the introduction of a range of new products over the period led to a temporary increase in stock in the factories, and debtors increased by £6.8 million in line with sales. Creditors decreased by £5.1 million over the period as bonuses charged against prior year profits were paid and timing of trade creditor payments resulted in a reduction in short term creditor balances compared to the same period last year. Investment in fixed assets including tooling for new products was £4.2 million. In addition to the investment of £30.3 million in TEN Media, cash of £3.3 million was used to pay contingent consideration earned on acquisitions made in earlier years. Dividend payments totalling £11.1 million were made in the period. Net cash and cash equivalents, after deducting short term debt, was £12.0 million. Related party transactions Related party transactions are disclosed in note 9. There has been no material change in the nature or scale of related party transactions described in the last annual report. Risk management The Group has an established risk management process. Risks and uncertainties are assessed and formally evaluated across the business and actions are taken to mitigate the adverse effects of unplanned events. The Group operates a Risk Management Committee comprising a cross functional team of senior executives with responsibility to ensure management are identifying, acting upon and monitoring risks. The Group’s Internal Audit function undertakes formal risk assessments as a part of the review of subsidiary operations across the Group. The Board receives regular reports on the maintenance of controls and formally reviews risk management policy annually. The key risks to which the business is exposed are included on page 20 of our latest annual report. These
5
Domino Printing Sciences plc Half Yearly Financial Report 2011
I N T E R I M M A N AG E M E N T R E P O RT To the members of Domino Printing Sciences plc continued have not changed significantly over the past six months and are not expected to do so over the remaining six months of the financial year. The Group has taken a 15% stake in TEN Media. The business is in its early stages of start up and therefore has exposure to risks of competition and market acceptance. Going concern The Group is cash positive and has committed debt facilities which run to the end of 2011. The Board intends to negotiate new committed debt facilities before or upon expiry of existing arrangements. The business of the Group is widely spread, both geographically and by market sector. The breadth and longevity of customer relationships which arise from the ongoing supply of products and services, means the Group remains well placed to manage its business risks successfully despite the current uncertain economic outlook. After making enquiries, the directors have a reasonable expectation that the Company and Group have adequate resources to continue to operate for the foreseeable future. The directors have also considered the Group’s forecasts and projections. Accordingly, the going concern basis has been adopted in the preparation of the half yearly financial report.
Outlook Trading was in line with our expectations in the first half year. We are pleased with the progress we have made in the introduction of new products and expect our investments in incremental sales and service resources to provide the capacity necessary to enable future growth. Continuing uncertainties surrounding sovereign debt and political changes in some countries mean we remain cautious on the global economy, but we continue to see customers investing, fuelling strong demand for our products. We are excited by the potential opportunities developing through TEN Media and expect first sales to take place next year. We believe the development of food safety legislation will continue and that our coding solutions will remain an integral part of necessary compliance systems. The Board remains confident in the prospects for the Group.
6
Domino Printing Sciences plc Half Yearly Financial Report 2011
I N D E P E N D E N T R E V I E W R E P O RT To Domino Printing Sciences plc
We have been engaged by the Company to review the condensed set of financial statements in the half yearly financial report for the six months ended 30 April 2011 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 11. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’, issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed. Directors’ responsibilities The half yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom’s Financial Services Authority. As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union.
Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half yearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’, issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half yearly financial report for the six months ended 30 April 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom’s Financial Services Authority. Deloitte LLP Chartered Accountants and Statutory Auditors Cambridge, United Kingdom 21 June 2011
7
Domino Printing Sciences plc Half Yearly Financial Report 2011
C ondensed C onsolidated I ncome S tatement FOR THE HALF YEAR ENDED 31 APRIL 2011
Half year to 30.4.11 Reviewed Total
Continuing operations
Note
£000
Half year to 30.4.10 Reviewed Total
Year to 31.10.10 Audited Total
£000
£000
Revenue 3 Cost of sales
156,350 (78,488)
144,826 300,006 (74,056) (150,953)
Gross profit Selling and distribution costs Administrative expenses Research and development
77,862 (26,938) (15,885) (7,897)
70,770 (23,871) (15,761) (7,069)
149,053 (49,450) (31,595) (15,592)
Operating profit 4 Investment income Finance costs
27,142 235 (241)
24,069 163 (359)
52,416 418 (688)
Profit before taxation Taxation
27,136 (8,228)
23,873 (7,110)
52,146 (14,915)
Profit for the period
18,908
16,763
37,231
Attributable to: Equity shareholders of the Company Non-controlling interest
18,829 79
16,694 69
37,130 101
18,908
16,763
37,231
Basic earnings per share (pence) Diluted earnings per share (pence)
17.24p 16.99p
15.45p 15.32p
34.25p 33.88p
3 5
2 2
8
Domino Printing Sciences plc Half Yearly Financial Report 2011
C ondensed C onsolidated S tatement o f C omprehensive I ncome FOR THE HALF YEAR ENDED 31 APRIL 2011 Half year to 30.4.11 Reviewed £000
Profit for the period Currency translation differences on foreign currency net investments (Losses)/gains on cash flow hedges Tax on items taken directly to equity
18,908 477 (42) –
Half year to 30.4.10 Reviewed £000
Year to 31.10.10 Audited £000
16,763
37,231
2,486 294 –
1,590 724 948
Total comprehensive income for the period
19,343
19,543
40,493
Attributable to: Equity shareholders of the Company Non-controlling interest
19,264 79
19,474 69
40,392 101
19,343
19,543
40,493
9
Domino Printing Sciences plc Half Yearly Financial Report 2011
C ondensed C onsolidated B alance S heet As at 30 April 2011
30.4.11 Reviewed £000
30.4.10 Reviewed £000
31.10.10 Audited £000
Non-current assets Goodwill Other intangible assets Property, plant and equipment Available for sale investments Investment in associate Deferred tax assets
71,135 10,539 25,664 32,017 287 9,166
68,424 12,426 25,029 1,735 216 7,866
70,161 11,040 24,832 1,734 225 8,504
148,808
115,696
116,496
Current assets Inventories Trade and other receivables Cash and cash equivalents Financial instruments
34,414 61,381 39,878 524
27,894 55,669 45,117 175
30,758 55,038 59,167 348
136,197
128,855
145,311
Current liabilities Bank loans and overdrafts Trade and other payables Financial instruments
(27,881) (64,911) (376)
(9,715) (65,749) (414)
(9,683) (67,932) (158)
(93,168)
(75,878)
(77,773)
Net current assets
43,029
52,977
67,538
Non-current liabilities Deferred tax liabilities Other payables
(6,120) (2,884)
(6,557) (7,484)
(6,504) (6,473)
(9,004)
(14,041)
(12,977)
Net assets
182,833
154,632
171,057
Equity share capital Own shares Share premium account Capital redemption reserve Revaluation reserve Taxation reserve Exchange reserve Retained earnings
5,543 (3,327) 36,078 908 898 1,781 14,939 125,660
5,501 (3,425) 33,729 908 898 5 15,280 101,482
5,514 (3,437) 34,381 908 891 953 14,504 117,069
Equity attributable to shareholders of the Company
182,480
154,378
170,783
Non-controlling interest
353
254
274
Total equity
182,833
154,632
171,057
10
Domino Printing Sciences plc Half Yearly Financial Report 2011
C ondensed C onsolidated S tatement o f C hanges in E q u it y
Investment in own shares £000
At 1 November 2010 (3,437) Profit for the period – Other comprehensive income for the period – Total comprehensive income for the period Shares issued during the period Shares awarded to share scheme participants Own shares acquired Withdrawal of SIP matching shares Reversal of share–based compensation charges Deferred tax on share based payment transactions Dividends (note 6) Transfer of amount equivalent to additional depreciation on revalued assets At 30 April 2011
Non– controlling interest £000
Total Equity £000
34,381 –
908 –
891 –
953 –
14,504 –
117,069 18,829
170,783 18,829
274 79
171,057 18,908
–
–
–
–
–
435
–
435
–
435
–
–
–
–
–
–
435
18,829
19,264
79
19,343
–
29
1,697
–
–
–
–
–
1,726
–
1,726
117 (34)
– –
– –
– –
– –
– –
– –
– –
117 (34)
– –
117 (34)
27
–
–
–
–
–
–
–
27
–
27
–
–
–
–
–
–
–
902
902
–
902
– –
– –
– –
– –
– –
828 –
– –
– (11,133)
–
(7)
–
Investment in own shares £000
At 1 November 2009 (3,783) Profit for the period – Other comprehensive income for the period –
At 30 April 2010
Share Capital premium redemption Revaluation Taxation Exchange Retained account reserve reserve reserve reserve earnings Total £000 £000 £000 £000 £000 £000 £000
5,514 –
(3,327)
Total comprehensive income for the period Shares issued during the period Shares awarded to share scheme participants Own shares acquired Withdrawal of SIP matching shares Reversal of share based compensation charges Dividends (note 6) Transfer of amount equivalent to additional depreciation on revalued assets
Called-up share capital £000
–
–
–
7
–
5,543
36,078
908
898
1,781
Called-up share capital £000
828 (11,133)
–
14,939 125,660 182,480
Share Capital premium redemption Revaluation Taxation Exchange Retained account reserve reserve reserve reserve earnings Total £000 £000 £000 £000 £000 £000 £000
– –
–
828 (11,133)
–
353 182,833 Non– controlling interest £000
Total Equity £000
5,467 –
32,226 –
908 –
904 –
5 –
12,500 –
93,642 16,694
141,869 16,694
185 69
142,054 16,763
–
–
–
–
–
2,780
–
2,780
–
2,780
–
–
–
–
–
–
2,780
16,694
19,474
69
19,543
–
34
1,503
–
–
–
–
–
1,537
–
1,537
308 (32)
– –
– –
– –
– –
– –
– –
82
–
–
–
–
–
–
– –
– –
– –
– –
– –
– –
– –
–
(3,425)
–
–
–
5,501
33,729
908
(6) 898
– 5
–
(308) – – 620 (9,172)
6
– (32)
– –
– (32)
82
–
82
620 (9,172)
–
15,280 101,482 154,378
– –
–
620 (9,172)
–
254 154,632
11
Domino Printing Sciences plc Half Yearly Financial Report 2011
C ondensed C onsolidated C ash Flow S tatement FOR THE HALF YEAR ENDED 31 APRIL 2011 Half year to 30.4.11 Reviewed £000
Half year to 30.4.10 Reviewed £000
Year to 31.10.10 Audited £000
9,244
23,506
47,083
235 (112) 31 (3,941) – (296) (3,303) (26) (30,283)
163 (144) 155 (2,283) – (24) (7,827) – (250)
418 (260) 192 (5,502) 10 (217) (7,718) – (250)
(37,695)
(10,210)
(13,327)
(11,133) 18,730 (65) (43) (34) 1,843
(9,172) – (365) (29) (32) 1,537
(15,163) – (737) (73) (65) 2,202
Net cash from/(used in) financing activities Effects of foreign exchange on cash balances
9,298
(8,061)
(13,836)
(135)
842
235
Net (decrease)/increase in cash and cash equivalents
(19,288)
6,077
20,155
Net cash inflow from operating activities (see note 8) Investing activities Interest received Interest paid Proceeds on disposal of property, plant and equipment Purchase of property, plant and equipment Proceeds on disposal of intangible assets Purchase of intangible assets Payment of contingent acquisition consideration Investments in associates Purchase of available for sale investments Net cash used in investing activities Financing activities Dividends paid New bank loans raised Repayment of borrowings Repayment of obligations under finance leases Own shares purchased Issue of equity share capital
Cash and cash equivalents at beginning of period
59,166
39,011
39,011
Cash and cash equivalents at end of period
39,878
45,088
59,166
Comprising: Cash and cash equivalents Bank overdrafts
39,878 –
45,117 (29)
59,167 (1)
39,878
45,088
59,166
12
Domino Printing Sciences plc Half Yearly Financial Report 2011
N OTE S TO TH E ACcO U NT S FOR THE HALF YEAR ENDED 31 APRIL 2011
1. Accounting policies The annual financial statements of Domino Printing Sciences plc are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union. The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group’s latest annual audited financial statements, except as described below. In the current financial year, various accounting standards have become effective. These include amended accounting standards resulting from annual improvements to IFRSs, as well as IFRS 1 (amended 2009), ‘First-Time Adoption of International Financial Reporting Standards’, IFRS 1 (amended 2010), ‘First-Time Adoption of International Financial Reporting Standards’, IFRS 2 (amended 2009), ‘Share Based Payment’ and IAS 32 (amended 2009), ‘Financial Instruments: Presentation’. In addition, one interpretation issued by the International Financial Reporting Interpretations Committee has become effective in the current period (IFRIC 19, ‘Extinguishing Financial Liabilities with Equity Instruments’). There have been no material changes to the Group’s accounting policies as a result of the Group’s adoption of these Standards and Interpretations. General information The interim financial information has not been audited but has been reviewed by the auditor in accordance with ISRE 2410 issued by the Auditing Practices Board. The information for the year ended 31 October 2010 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor’s report on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s498 (2) or (3) of the Companies Act 2006. 2. Earnings per share Earnings per share are calculated by dividing the profit on ordinary activities attributable to shareholders by the weighted average number of shares in issue during the period (110,555,388) less the weighted average shares in the Company purchased by the Company’s Employment Benefit Trust (1,226,592) less the weighted average shares issued to the Company’s QUEST scheme (35,867) less the weighted average shares held to satisfy the Group’s Share Incentive Plan obligations (101,861). The weighted average number of shares used, therefore, is 109,191,068 (Half year to 30 April 2010: 108,082,553, Year to 31 October 2010: 108,416,060). The weighted average number of shares used in the diluted earnings per share calculation is the figure used in the basic earnings per share calculation adjusted by 1,630,034 (Half year to 30 April 2010: 917,994, Year to 31 October 2010: 1,191,577), being the number of shares deemed to be issued for no consideration if all share options had been exercised. The weighted average number of shares used, therefore, is 110,821,102 (Half year to 30 April 2010: 109,000,547, Year to 31 October 2010: 109,607,637). The earnings used in the diluted earnings per share calculation are the profit on ordinary activities attributable to shareholders. The Group presents an alternative measure of earnings per share before the post-tax effects of: • amortisation of intangible assets arising on business combinations (Half year to 30 April 2011: £678,000, Half year to 30 April 2010: £761,000, Year to 31 October 2010: £1,527,000); • any exceptional costs incurred in the period (Half year to 30 April 2011: £nil, Half year to 30 April 2010: £nil, Year to 31 October 2010: £nil); and • the notional, non-cash interest charge on discounted long term contingent consideration (Half year to 30 April 2011: £129,000, Half year to 30 April 2010: £214,000, Year to 31 October 2010: £430,000). The effect of the above items on basic earnings per share is presented below: Half year to 30.4.11 Reviewed
Half year to 30.4.10 Reviewed
Year to 31.10.10 Audited
Basic earnings per share (pence) Effect of acquired intangibles amortisation (pence) Effect of notional interest charge on discounted contingent consideration (pence)
17.24 0.62 0.12
15.45 0.70 0.20
34.25 1.40 0.40
Underlying earnings per share (pence)
17.98
16.35
36.05
Underlying diluted earnings per share (pence)
17.72
16.21
35.66
13
Domino Printing Sciences plc Half Yearly Financial Report 2011
N OTE S TO TH E ACcO U NT S FOR THE HALF YEAR ENDED 31 APRIL 2011 continued 3. Segment reporting For the purposes of reporting to the Board of Directors, the Group’s operations are categorised by location of subsidiary. Half year to 30.4.11 Reviewed £000
Half year to 30.4.10 Reviewed £000
Year to 31.10.10 Audited £000
External revenue by location of subsidiary Europe Americas Rest of the World
92,497 29,318 34,535
86,217 29,250 29,359
175,388 63,358 61,260
156,350
144,826
300,006
Segment result by location of subsidiary Europe Americas Rest of the World Eliminations
25,333 2,071 8,879 (1,244)
21,774 1,475 7,954 (65)
48,611 6,094 16,716 (3,413)
Central research and development
35,039 (7,897)
31,138 (7,069)
68,008 (15,592)
Operating profit Net interest
27,142 (6)
24,069 (196)
52,416 (270)
Profit before taxation
27,136
23,873
52,146
Segment assets by location of subsidiary Europe 398,769 361,931 394,788 Americas 42,080 43,723 46,586 Rest of the World 35,449 35,530 30,957 Eliminations (191,293) (196,633) (210,524)
285,005
244,551
261,807
Segment liabilities by location of subsidiary Europe (167,485) (158,366) (175,626) Americas (28,904) (33,957) (34,626) Rest of the World (14,982) (16,210) (17,317) Eliminations 109,199 118,614 136,819 (102,172)
(89,919)
(90,750)
4. Operating profit Operating profit for the half year to 30 April 2011 is stated after charging £916,000 amortisation of acquired intangible assets (Half year to 30 April 2010: £1,057,000). Operating profit for the full year ended 31 October 2010 includes amortisation of acquired intangibles of £2,092,000. 5. Taxation Tax for the period is charged at a composite tax rate of 30.3 per cent (Half year to 30 April 2010: 29.8 per cent, Year to 31 October 2010: 28.6 per cent), representing the best estimate of the average annual effective income tax rate expected for the full year.
14
Domino Printing Sciences plc Half Yearly Financial Report 2011
N OTE S TO TH E ACcO U NT S FOR THE HALF YEAR ENDED 31 APRIL 2011 continued 6. Dividends Half year to 30.4.11 Reviewed £000
Half year to 30.4.10 Reviewed £000
Year to 31.10.10 Audited £000
Amounts recognised as distributions in the period: Final dividend for the year ended 31 October 2010 of 10.14 pence per share (2009: 8.45 pence) Interim dividend for the year ended 31 October 2010 of 5.48 pence per share (2009: 4.57 pence)
11,133 –
9,172 –
9,172 5,979
Distributions to non-controlling interests
11,133 –
9,172 –
15,151 12
11,133
9,172
15,163
The interim dividend of 6.58 pence per share has been approved by the Board and will be paid on 19 August 2011 to shareholders on the register at close of business on 15 July 2011. The interim dividend has not been included as a liability at 30 April 2011. 7. Share capital During the six months ended 30 April 2011 a total of 592,565 new ordinary shares of 5p each were issued under the Company’s Executive and Savings Related Option Schemes for £1,726,000. 8. Net cash inflow from operating activities Half year to 30.4.11 Reviewed £000
Half year to 30.4.10 Reviewed £000
Year to 31.10.10 Audited £000
Operating profit
27,142
24,069
52,416
Depreciation of property, plant and equipment Amortisation of intangible assets acquired through business combination Amortisation of other intangible assets Share based compensation charges Increase in inventories* Increase in receivables* (Decrease)/increase in payables* Decrease in restructuring and redundancy provisions Non-cash write down of goodwill and acquisition intangibles* Other non-cash items
2,730
2,612
5,329
916 97 902 (4,311) (6,828) (5,074) – – 155
1,057 74 620 (1,717) (6,517) 8,963 (1,286) – (38)
2,092 172 1,433 (4,011) (5,440) 9,050 (2,069) 448 271
Net cash inflow from operating activities before taxation Tax paid
15,729 (6,485)
27,837 (4,331)
59,691 (12,608)
Net cash inflow from operating activities
9,244
23,506
47,083
* Net of effect of change in exchange rates.
9. Related party transactions Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this statement. Transactions between the Group and its associates are disclosed below. During the period, Group companies entered into the following transactions with related parties who are not members of the Group: Sale Purchase of goods of goods Associate – Mectec BV £000 £000
Six months ended 30 April 2011 Year ended 31 October 2010 Six months ended 30 April 2010
293 532 276
124 54 42
Amounts owed to related parties £000
Amounts owed by related parties £000
12 – 7
47 106 56
15
Domino Printing Sciences plc Half Yearly Financial Report 2011
N OTE S TO TH E ACcO U NT S FOR THE HALF YEAR ENDED 31 APRIL 2011 continued Sale Purchase of goods of goods Associate – Mectec BVBA £000 £000
Six months ended 30 April 2011 Year ended 31 October 2010 Six months ended 30 April 2010
74 70 –
– – –
Amounts owed to related parties £000
Amounts owed by related parties £000
– – –
26 39 –
Sale of goods to related parties were made at the Group’s usual list prices. Purchases were made at market price discounted to reflect the quantity of goods purchased and the relationships between the parties. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties. 10. Underlying profit before tax Underlying profit before taxation is £28,181,000 (Half year to 30 April 2010: £25,144,000, Year to 31 October 2010: £54,668,000) comprising:
Half year to 30.4.11 Reviewed £000
Half year to 30.4.10 Reviewed £000
Year to 31.10.10 Audited £000
Profit before taxation Amortisation of acquired intangibles Interest charge on discounted contingent consideration
27,136 916 129
23,873 1,057 214
52,146 2,092 430
28,181
25,144
54,668
11. Investment in available for sale asset In April 2011, the Group announced that it had entered into a partnership with NewMarket Impressions, a US based business, in the formation of a new company, TEN Media, to provide safety systems for the fresh egg industry. The Group made an investment of $50 million (£30.3 million) for a 15 per cent share in the company and has exclusive supply agreements with TEN Media for all coding equipment and services.
Domino Printing Sciences plc Trafalgar Way Bar Hill Cambridge CB23 8TU T +44 (0) 1954 782 551 F +44 (0) 1954 782 874
www.domino-printing.com
