Datacolor in the first half 2017/18

In the first half of fiscal year 2017/18 Datacolor AG increased net sales by 17.4% to USD 41.0 million (previous year: USD 34.9 million), an increase of 14.2% in local currencies. Datacolor's sales in the re­porting period were significantly influenced by a substantial order from a major retail chain in North America for a complete software and hardware system. The results for the first half of fiscal year 2017/18 include not only positive currency effects, but also earnings from the newly launched ColorReader family of mobile micro color measuring instruments. Although sales increased significantly due to the extraordinary order from the US retail chain, the gross profit margin of 64.0% (previous year: 67.7%) was below the previous year. The distinct decrease is explained by the product mix. On the one hand, an exchange program for higher-margin high-end instruments is expiring, and on the other hand the substantial order from a major retailer has a substantially lower gross margin compared to Datacolor's other product portfolio due to an unusually high share of hardware. As a result, the EBIT of USD 3.1 million (previous year: USD 3.4 million), the EBIT margin of 7.7% (previous year: 9.8%) and the EBITDA margin of 10.4% (previous year: 14.2%) were also significantly below the previous year's figures. The financial result was neutral in the second quarter of the fiscal year (previous year: USD 0.9 million) due to the high volatility of the stock markets. Accordingly, net income decreased to USD 2.3 million (previous year: USD 3.4 million) compared to the prior year. Datacolor AG continues to be debt-free. Net liquidity increased to USD 39.7 million (September 30, 2017: USD 38.2 million) and includes financial assets of USD 23.5 million (previous year: USD 18.8 million). At 61.2% (September 30, 2017: 62.0%), Datacolor has a very solid equity ratio. In comparison with the previous year, the average num­ber of employees increased by 41 to 413 full-time equivalents. Most of the new employees were employed in the areas of sales and marketing as well as research and development.

Substantial order from the US retail trade has a major impact on half-year results

Thanks to Datacolor's strong commitment to developing easy-to-use and cost-effective solutions for precise color matching, the Company has a strong market position throughout the world. Datacolor has therefore won the order to install its retail paint color management solution in over 4,000 stores of a major US retailer. This is the largest single order Datacolor has ever received in its history. This excep­tional major order strengthens Datacolor's image as a leading international color management company and enables the company to significantly accelerate the implementation of various innovative growth projects that are crucial for the future with decisive investments.

Strong growth in America and Europe – investments in market position in Asia

The company continued its geographical expansion, especially in the Asia region. Datacolor recently established a subsidiary in Vietnam with the goal of further strengthening its strong sales and marketing organization. Sales in Europe kept pace with the Group's strong sales growth due to solid growth rates in the pigments business. At 36.1% (previous year: 35.8%), Europe is again Datacolor's largest market region. The North and South America region also showed strong growth, increasing its share of Group sales to 32.8% (previous year: 27.0%).

Outlook

With its very sound balance sheet and high level of liquidity, Datacolor intends to significantly expand its strong market position in the textile, paint and coatings industry with new, high-precision color meas­urement instruments and software, as well as the accelerated expansion of its sales and service organi­zation. The Board of Directors intends to lay a solid basis for long-term growth by further increasing investments in the development and market introduction of innovative product families and in strength­ening direct sales and services, particularly in Asia and America. Assuming a favorable global economic development, Datacolor continues to strive for a continuous increase in sales. Extraordinary orders such as the one-time delivery to a major retail chain in North America will hardly be repeated in the short term. The conscious investments in product and market development to increase sales are long-term in scope and will mean that Datacolor's margins and results can hardly be significantly increased in the coming years.

Lucerne, May 4, 2018

The full half year report 2017/18 is available on:
http://ir.datacolor.com/en/financial-reports

About Datacolor

Datacolor, a global leader in color management solutions, provides software, instruments and services to assure accurate color of materials, products and images. The world's leading brands, manufacturers and creative professionals have used Datacolor's innovative solutions to consistently achieve the right color for more than 45 years. The company provides sales, service and support in over 100 countries throughout Europe, the Americas and Asia. Industries served include textile and apparel, paint and coat­ings, automotive, plastics, photography and videography. For more information visit www.datacolor.com.