Tardy TEN mars strong Domino showing

Sales are up in Domino's core business, but the group's share price has been hit by slow progress at TEN Media.

North American egg coding and traceability business TEN Media has encountered delays in its system validation programme, and needs a fresh injection of cash to complete its roll-out plans.

Inkjet specialist Domino Printing Sciences invested $50m (£33m) in TEN in 2011. It has a 14.85% stake in the business, which was valued at $500m last April when another investor bought into the venture.

In its interim management statement Domino said it remained "supportive of TEN and its objectives" but would not be committing further capital to it at the present time.

Depending upon what happens at TEN, which has appointed advisers to help it raise new capital, Domino may need to write down the carrying value of its investment.

Domino shares slipped by 45p, or 6.43%, to 655p after the announcement yesterday (19 March) and were down a further 12p in early trading today.

The news was much better across Domino’s core businesses, where sales increased by 11% year-on-year in the four months to the end of February. Recent acquisitions Graph-Tech and PostJet are both progressing "in line with plan", contributing 3% to the figure.

"The longer-term prospects for TEN are positive, but news that things there are taking longer than planned has hit the share price. This is a shame when so much in our core business is going so well," said Domino group managing director Nigel Bond.

"Fundamentally, the TEN Media investment is about a trading relationship that will get a lot of our equipment into the USA. None of that has changed."

Equipment and consumables sales both increased by 9%, while spares and service revenue grew by 13%. Domino said it was pleased with progress across its range of printers, with volumes in continuous inkjet products growing in "mid single digits".

The Cambridge-headquartered firm said it remained cautious about the outlook in Europe, where customers are reluctant to replace existing equipment. Investment was returning to "more normal levels" in North America and Asia.

"We have managed to achieve 8% growth without our biggest market [China] adding anything to the growth line, and that’s pretty encouraging," Bond added.

In January the company confirmed that it had sold its first N600i colour inkjet label press, to Belgian label printer Reynders, which beta-tested the system. Domino has subsequently made the first commercial N600i sale to an unnamed North American printer.

Domino is upbeat about the prospects for the label press and for the black-and-white K600i overprinting system, which is based on the same platform. It sold 30 K-series systems last year and Bond said he expected to double that in 2013.

Domino will release its interim results on 25 June.


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