2014 final-results-presentation

Results for the year ended 31 October 2014

1

Agenda

Domino Printing Sciences

Business review

2014 Highlights1

Financial review

2

3

4

5

Outlook

2

£m 2014 2013 Growth

Sales £m 350.2 335.7 +4%

Sales (at constant exchange rates) £m 364.4 335.7 +9%

Underlying PBT 57.6 53.0 +9%

Research and Development expenditure 18.2 19.5 -7%

Operating Cash Flow £m 65.8 54.9 +20%

Underlying Earnings per Share 40.01p 35.30p +13%

Dividends declared per Share 22.74p 21.66p +5%

2014 Highlights - results

Domino Printing Sciences 3

� Underlying sales growth of 9 per cent

– Equipment revenue growth of 10 per cent

– Aftermarket revenue growth of 7 per cent

� Equipment revenues in Europe up 19 per cent

� 19 N-Series digital label presses recognised in revenue; installations in progress/commitments from customers for 8 more at year end (to be recognised during 2015). Fluids business developing in line with business plan

� £18.2 million investment in R&D; increase planned in 2015

� New factory in India commissioned and fully operational from start of 2015

� Strong operating cash flow; £40.1 million net cash at year end

2014 Highlights


£m 2014 2013 Growth Const XR Growth

Europe 150.1 137.6 9% 153.8 12%

Americas 80.5 83.1 -3% 85.7 3%

Asia / ROW 119.6 115.0 4% 124.9 9%

Total 350.2 335.7 4% 364.4 9%

Business review - Sales by Geography



UK 24.5 22.0 11% 24.5 12%

France 22.9 20.9 9% 23.6 13%

Germany 32.9 30.3 8% 34.0 12%

Rest of Europe 69.8 64.5 8% 71.7 11%

Total 150.0 137.6 9% 153.8 12%

Business review - Sales in Europe



USA 53.7 53.9 0% 56.7 5%

Rest of N America 17.1 18.2 -6% 18.7 3%

S America 9.7 11.0 -11% 10.3 -7%

Total 80.5 83.1 -3% 85.7 3%

Business review - Sales in Americas



China 42.2 41.9 1% 44.5 6%

India 19.3 18.5 4% 21.8 17%

Rest of Asia 32.8 31.1 5% 33.1 6%

ME / Africa 25.3 23.4 8% 25.5 9%

Total 119.6 115.0 4% 124.9 9%

Business review - Sales in Asia/ ROW


£m 2014 2013 Growth

Printers 141.7 128.0

Ancillaries 16.4 15.2

Equipment 158.1 143.2 10%

Consumables 134.2 125.1 7%

Spares & Services 72.1 67.4 7%

Total 364.4 335.7 9%

At constant currency

equip

ment

consu

mable

s

spare

s &

serv

ices

Americaoverall 3%

Europeoverall 12%

Asia / ROWoverall 9%

Business review - Sales by product


0%4%

5%

19%

6%7%

7%

14%

9%

9

SALES

� Strong sales in first half year, a number of larger volume deals

� Some signs that markets are slowing as we enter 2015 – order intake in H2 2014 was stable, but not growing, compared with H1 2014

� Major successes in target sectors - Food, Beverage, Tobacco

� FMD legislation is a driver in Pharma sector but little customer investment yet made (full compliance mandated from mid 2018)

� Group-wide focus on aftermarket in 2014 delivered a further increase in retention rates; revenue growth was 7 per cent

Business review – Coding & Marking


PROFITS

� Average selling prices of equipment (developing markets) fell during H1 2014 but stabilised in H2

� Aftermarket margins held at prior year levels

� Investments planned in 2015 in large account development as well as in additional sales and service capacity in some territories

� Accelerated R&D programmes - will mean increased investment during 2015

Business review – Coding & Marking


SALES

� Good progress in label sector (our key focus area)

� Interest in digital printing capability increasing among brand owners as well as label converters

� We continue to work with OEM partners to develop broader packaging printing opportunities

� N610i with seven colours introduced at LabelExpo. Sales made from the stand.

� 19 N-Series full-colour presses recognised in revenue in the year

� Fluids consumption is increasing as presses are brought into full production

Business review – Digital Printing


PROFITS

� Investment in people ahead of sales – skills, experience, capacity

� Investment in facilities – demonstration and labs in UK and USA

� Investment in products – next generation press; first water-based fluids

� Expect DP business to be loss making again in 2015

Business review – Digital Printing


� Continued investment in common platform product range

– New printers in 2014 include A520i high performance CIJ and V230i mid range Thermal Transfer Overprinter

– Next generation CIJ printer development on track for 2016 launch

– Other projects include next generation drop on demand ink jet technology products

� New fluids products

– Range of new CIJ inks with enhanced performance on plastics

– New thermal ink jet inks

– Introduction of internally developed water based inks for digital press

Business review – Research & Development


� Investments in additional capacity

– New factory in India (printers and fluids) to serve domestic market

– Land purchased in Bar Hill, UK to allow for expansion of HQ site. Initial ground-work underway; timing of full build still uncertain

– Board approval for a new factory in China (printers and fluids) to provide capacity required to meet projected demand in Asia. £10m capex project, expected to complete within 2 years

� New buildings are designed to be energy efficient and to reduce impact on environment

� Sustainability is a key agenda item across our operations

� Organisational changes made to sharpen our focus on effective customer service through more efficient processes

� IT investments to help simplify, automate and reduce costs

Business review – Operations & Business Excellence


� Legislation and mandates in the core business and the favourable economics of digital printing technology are all drivers of medium term growth

� Uncertainty remains in some markets - this typically means less investment in new equipment which makes predicting shorter-term results more difficult

� Aftermarket revenues and margins remain strong; we are constantly seeking ways of increasing customer penetration

� The digital printing market is developing and we expect to see further growth during 2015. We have a leadership position today and we are investing (and hence increasing costs ahead of sales) in people, facilities and products. The business will move into profit as the installed base grows and the aftermarket increases

� We are investing in R&D, capacity and capability to increase future profit potential

Business review – Summary


£m 2014 2013 Growth 2014 at ‘13 rates

Change Growth

Sales 350.2 335.7 4% 364.4 14.2 9%

Gross Profit 168.3 161.5 4% 171.9 3.6 6%

Gross Profit % 48.1% 48.1% 47.2%

S,D&A (93.2) (89.3) 4% (96.3) (3.1) 8%

R&D (18.2) (19.5) -7% (18.4) (0.2) -6%

EBITA* 57.0 52.7 8% 57.2 0.2 9%

% 16.3% 15.7% 15.7%


Financial Review – Income statement

* Before one-off items

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Financial Review – Gross Profit

£m %

2013 161.5 48.1

Sales volume 13.8

Equipment/aftermarket mix (0.6) (0.2)

Other price/cost effects (2.8) (0.7)

2014* 171.9 47.2

FX

Gross Profit translation (5.5)

Forward contracts 0.3

Other translation effects 1.6

Reported gross profit 168.3 48.1

* At constant currency

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Financial Review – R&D spend

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£m 2014 2013 Growth 2014 at ‘13 rates

Change Growth

EBITA 57.0 52.7 8% 57.2 0.2 9%

Interest 0.6 0.3 0.6 0.1

U/L PTP 57.6 53.0 9% 57.8 0.3 9%

% 16.4% 15.8% 15.9%

Amortisation (3.1) (3.3) (3.1)

Not. Interest (0.0) (0.0) (0.0)

One-off/exceptional

2.1 (32.0) 2.1

PBT 56.5 17.7 220% 56.8 0.3 221%


Financial Review – Income statement

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£m 2014

PBT impact

Forward contracts 0.3

Profit translation (2.2)

Other short term 1.6

Total (0.3)

£ € $ Rmb Rps Other Total

Sales split 33% 24% 18% 12% 5% 8% 100%

Revenue impact £m 3.1 3.8 2.3 2.4 2.6 14.2


Financial Review – Currency Effects

£m

Euro (0.6)

Dollar (0.1)

Renminbi (0.2)

Rupee (0.7)

Other (0.6)

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US$ euro Rmb Rps

Closing 2014FY 1.60 1.28 9.78 98.23

2013FY 1.61 1.18 9.79 98.73

Change -1% 8% 0% 0%

Average 2014FY 1.66 1.23 10.19 101.09

2013FY 1.56 1.19 9.64 89.59

Change 6% 3% 6% 13%

Forward contracts 2015 1.65 1.24 10.1 -

2014 1.57 1.18 10.6 -

Forward contracts in place that mature during 2015 will realise losses of £1.1m compared with contract rates in 2014


Financial Review – ForEx rates

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£m 2014 2013

Basic U/L Basic U/L

U/L PTP 57.6 57.6 53.0 53.0

Amortisation, Not. interest (3.1) (3.3)

Exceptional items 2.1 (32.0)

PBT 56.5 57.6 17.7 53.0

Tax (11.9) (11.8)

EPSGrowth

39.8663%

40.013%

5.2 35.3

Dividend per shareCover (underlying)

22.741.76

21.661.63


Financial Review – Earnings

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£m 2014

PBT 56.5 a

Non tax adj. to provision for contingent consideration (2.1)

Taxable profit 54.4 b

Taxation – gross (13.7) c

One-off adjustment in respect of WHT on China dividend

1.4

Other prior year adjustments 0.4

Net taxation (11.9) d

Headline rate on PBT 21.1% d/a

Effective rate on taxable profit 21.9% d/b

Underlying rate before one-off adjustments 25.1% c/b


Financial Review – Tax rate year on year

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£m 2014 %

Tax at standard UK rate (12.3) (21.8)*

Impact of tax on overseas profits (2.5) (4.4)

Tax incentives 1.3 2.4

Deferred tax & other non-taxable (0.2) (0.3)

Gross taxation (13.7) (24.1)

Prior year adjustments 1.8 3.0

Tax charge for the year (11.9) (21.1)


Financial Review – Tax rate UK rate reconciliation

* 23% for 5 months; 21% for 7 months of financial year

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£m 2014 2013

EBITDA 65.6 56.0

Working Capital 0.7 (0.7)

Other non-cash (0.5) (0.4)

Operating Cash Flow 65.8 54.9

CapEx (net) (12.5) (9.1)

Tax (13.4) (11.9)

Operating cash flow after tax 39.9 33.9


Financial Review – Cash flow

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£m 2014 2013

Operating cash flow after tax 39.9 33.9

Interest (net) 0.5 0.3

Dividends (24.8) (23.5)

Cash flow after financing 15.6 10.7

Investments (inc. deferred) (0.7) (0.2)

Purchase of own shares (0.1) (0.9)

Bank loans raised / (repaid) (net) (33.3) (0.4)

Other (inc FX) (0.4) 2.6

Net movement in cash (18.9) 11.8

Closing gross cash 40.5 59.4

Closing net cash 40.1 25.5


Financial Review – Cash flow

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� The Group has had a good year and delivered results in line with our expectations. We continue to invest in research and development and in growing the capability and capacity of our digital printing business.

� However, we remain cautious about 2015. As announced in our Interim Statement, the investments we are making, coupled with uncertain market conditions, mean we expect results in 2015 to be at a broadly similar level to this year.

� Our strong product range and our investments in developing our capabilities

mean we remain optimistic about the Group’s longer-term prospects.


Outlook

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