FTSE 250 firm Domino Printing Sciences is bringing in big bucks from a weaker pound.
Domino Printing Sciences (LSE: DNO), a leading manufacturer of coding and labelling machinery, unveiled its half-year results this morning.
This Domino hasn't fallen
While other companies worry about big issues such as euro-zone contagion, bank stress-tests and Chinese inflation, Domino strides ahead, quietly selling more and more ink-jet and barcode-printing equipment.
In the six months ending 30 April, this FTSE 250 firm reported revenue of £144.8 million, up a sixth (17%) on the same period of 2008/09. Boosted by cost-cutting, Domino's pre-tax profit more than doubled, rising 110% to £23.9 million.
The good news for Domino shareholders is that earnings per share (EPS) soared to 15.45p from 6.70p, an increase of 131%. This hefty increase in EPS has led to Domino hiking its interim dividend 20%, to 5.48p a share, versus 4.57p previously.
As I write, Domino shares are up 1.5% to 472p, slightly ahead of the wider market.
Sound as a pound?
Via its network of 25 subsidiary offices and 200 distributors, Domino sells to clients in over 120 countries. Indeed, the group makes over 90% of its sales overseas. What's more, its client base is quite varied: instead of relying largely on cyclical and industrial buyers, it supplies equipment to steady industries such as food, beverage and pharmaceutical producers.
Despite the feeble economic recovery since mid-2009, Domino (founded in 1978) has been a major beneficiary of a weakening pound. As sterling falls against other currencies, this makes British exports cheaper in the global market -- and Domino seems to have seized this opportunity in spades.
Indeed, the firm -- which has a market cap of £516 million -- said that sales of printing equipment rose 30% and demand for ink has returned to pre-recession levels, thanks to customers resuming capital spending. However, sales growth slowed in March and April as customer re-stocking eased off.
No great bargain
With such excellent results -- and net cash of £35.4 million after deducting short-term debt -- there's no doubt that Domino is a solid business on the growth track. However its shares -- a firm favourite with fund managers -- have more than doubled in the past 12 months, rising 118%.
Therefore, I suspect that much of today's good news is already baked into Domino's share price.
Even with results ahead of forecasts, Domino Printing Sciences doesn't make my buy list. With a price-earnings ratio in the twenties and a dividend yield below 3%, there is better value to be found elsewhere in the FTSE 350.
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