UPDATE 2-UK's Domino Printing warns on 2015 results; shares sink

Tue Jun 24, 2014 5:23am EDT

* Says 2015 results could be similar to current year

* Faces pricing pressure in Asia, other developing mkts

* Shares fall as much as 14.2 pct (Adds comments from managing director and analyst, details, background, share movement)

By Esha Vaish

June 24 (Reuters) - Barcode-printer maker Domino Printing Sciences Plc cautioned that pricing pressure in Asia and other developing markets coupled with increased research and development expenses would weigh on earnings for the next year.

Shares in the company slumped more than 14 percent, making them the top percentage losers on the London Stock Exchange on Tuesday morning.

The company, which makes printers to stamp barcodes and expiry dates on food items, beverage cans and medicines, said results for the next financial year ending October 2015 could be "broadly similar" to that of this year. It said it was on track to meet market expectations for the current year.

Analysts were expecting a pretax profit of 54 million pounds ($92 million) on revenue of 335.12 million pounds for the current financial year, according to Thomson Reuters I/B/E/S.

"(When) we talk about Asia and developing markets, there is a bit of a land grab going on from the competition to gain share in these countries," Managing Director Nigel Bond told Reuters.

Bond said U.S. firm Dover Corp's rival product 'markem-imaje' and Danaher's 'videojet' were being aggressively priced in Asia.

"These are the countries, the big volume markets, where because of the strength of the encompass, there is some increased price activity going on at the current time."

The profit warning prompted Numis Securities analysts to reduce their earnings forecast for Domino Printing's next financial year by 5 percent.

CHINA, INDIA VOLUMES SURGE

Domino Printing, whose unijet printers have been used to print numbers on bingo tickets for over three decades, said despite pricing pressures in developing markets, increased volume sales in China and India brought the company to shore.

The company said new product launches and a pickup in sales in its European business helped underlying pretax profit jump 10 percent to 27.5 million pounds for the six months ended April 30. Revenue grew by 7.4 percent to 173.8 million pounds.

Excluding the impact of currency translations, European sales increased by 13 percent, while demand from China and India helped its Asia business clock sales growth of 12 percent.

A slump in European markets, which account for about 43 percent of its turnover, has been easing with Domino Printing saying that the number of customers looking to invest in larger coding projects had increased significantly compared to the past two years.

Bond said while the company's German arm had continued to demonstrate strength, Mediterranean countries, which had "suffered the most over the recession", were boosting its regional revenue contribution.

He named UK, France, Spain, Portugal and Italy as countries where trading conditions were improving.

The Cambridge, England-headquartered company raised its interim dividend to 7.98 pence per share from 7.60 pence.

The FTSE-250 component, which hit a life-high of 880.50 pence on Jan. 17, has since lost about 13 percent of its value to Monday's close.

Shares in Domino Printing were down 13.8 percent at 636.38 pence per share at 0915 GMT. ($1 = 0.5880 British Pounds) (Reporting by Esha Vaish in Bangalore; Editing by Gopakumar Warrier)

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