The Cambridge-based inkjet manufacturer said the dip was largely due to disappointing sales in parts of Western Europe, particularly France and Germany, and China.

Domino said that in Europe, volumes of newer technology products had grown but sales of continuous inkjet printers had fallen as a result of extended replacement cycles.

While in China, Domino suffered both from weaker market conditions and the discovery of a Chinese manufacturer passing off its printers and after market products as Domino branded products.

Domino said it had been successful in stopping this illegitimate supply and that while it was unlikely to have had a material impact on sales, the investigation and associated action had been a distraction for its local management team.

On the plus side, Domino recorded double digit sales growth in North America, up almost 11% to £66.9m, and most of Asia, as well as good single digit growth in the UK, parts of Europe and the Middle East.

Pre-tax profit was down 6% at £53.9m (2011: £57.4m), while net profit virtually flat at £40.7m (2011: £40.8m). Domino reported a 6% increase in consumables sales for the year and said that sales of its mono digital label press, the K600i, had exceeded expectations, while the first orders for the N600i full colour label press had been taken, following a successful beta trial.

Investment in R&D rose 9% to a record £16.7m, while Domino spent £18.5m on acquisitions, including the customer database and certain IP of Mikrojet Systems for €300,000 (£248,00), the remaining 80.65% equity in Graph-Tech for £10.4m, and the entire share capital of PostJet Systems for £7.9m.

Total deferred consideration in relation to these three acquisitions was £3.2m while the group had an outstanding potential contingent consideration at the year end of £10.8m, payable over the next five years.

Domino used £7.8m in cash in the year in completion of the contingent consideration arrangements for APS, Mectec, Easyprint, On-Line Coding, and Marque TDI, and invested £6.7m in fixed assets, including £1m in land and a new factory in India, with a further £1m expected to follow on this project in 2013.

The group received planning permission for the expansion of its headquarters in Bar Hill, Cambridge in March, but has placed that project on hold along with the planned new factory build in China.

Domino chairman Peter Byrom said: "We leave 2012 as we entered it with a combination of uncertainty and instability in world economies. We remain cautious about market conditions and their impact on the investment plans of our customers.

"Against this backdrop we are optimistic about prospects for the future. We continue to invest in new products which are driving growth, our after market business is robust and we expect the investments we made during 2012 to contribute to growth in 2013 and beyond."