Annual Report 2010
Preliminary Results for the year ended 31 December 2010
- Buoyant Q4 2010 helped to deliver pre-tax profits in line with upgraded market expectations issued in January 2011
- Sales up 17% to £36.6m (2009: £31.3m) – reflecting recovery in all key markets in Europe, North America and Asia
- Recurring income (from software maintenance and support contracts) rose to £11.6m (2009: £10.2m) and now accounts for 32% of total sales
- Investment in software R&D of £9.4m – will support ongoing expansion (2009: £8.9m)
- Pre-tax tax profit substantially increased, to £2.26m (2009: £0.59m)
- Basic earnings per share up to 29.7p (2009: 5.0p)
- Unrestricted net cash doubled to £8.8m (2009: £4.4m)
- Final dividend of 4.15p proposed (2009: 3.9p), taking total to 5.50p (2009: 5.25p), up 5%
- Q1 2011 commenced well and Delcam is well-positioned to deliver improved trading results if current trend continues
The Group has changed its accounting policy regarding the reporting of maintenance revenues in order to recognise these revenues on a straight line basis. Accordingly, results for 2010 are stated on this basis and results for 2009 have been restated.
After a strong recovery in sales and profits in the first half of the financial year, we were optimistic that, if trading conditions remained favourable, full-year results would show a significant improvement on the results for 2009. Trading in the fourth quarter, which is typically Delcam’s most active trading period, was buoyant and, in January, we issued a statement to announce that the Board expected the Group to deliver pre-tax profits above market expectations.
I am now pleased to report that pre-tax profits for the year to 31 December 2010 were substantially higher than the prior year, at £2.26 million (2009: £0.59 million). Sales for the year reached a record level, increasing by 17% to £36.6 million (2009: £31.3 million).
These results were driven by improved sales across all Delcam’s key markets in Europe, North America and Asia, with the Group’s newer territories in China and India showing significant growth. The marked upturn in sales benefited from our decision to maintain product development and marketing investment during the downturn of 2009.
Financially, the Company’s position remains strong, with unrestricted net cash increasing by £4.4 million to £8.8 million.
Sales for the year to 31 December 2010 increased by 17% to £36.6 million, compared to £31.3 million in 2009. This reflected improved sales in most of our markets. Maintenance revenues, derived from software maintenance and support contracts, accounted for 32% of Group sales, at £11.6 million, up from £10.2 million in the previous year. These revenues continue to represent a predictable, recurring income stream. The Group has changed its accounting policy regarding the reporting of maintenance revenues in order to recognise these revenues on a straight line basis. Accordingly, results for 2010 are stated on this basis and 2009 numbers have been restated. This resulted in an increase in deferred income of £1.3 million at 31 December 2010.
In line with our strategy to promote long-term growth, the Company continued its high levels of investment in product development. We invested £9.4 million over the period, an increase from the £8.9 million invested in 2009. New versions of all of our main software products were released during the second half of the year and were received well by our customers.
Profit before tax for the year increased to £2.26 million compared with £0.59 million generated during 2009. Basic earnings per share improved to 29.7p against 5.0p in the previous year.
The balance sheet remains strong, with net cash of £10.6 million, including £1.8 million of restricted cash, at the end of the year, compared to net cash of £5.7 million (£1.3 million restricted) at the end of 2009.
The Board is pleased to propose an increased final dividend of 4.15p per ordinary share (2009: 3.9p). This makes a total for the year of 5.5p per share (2009: 5.25p). The final dividend will be paid on 13 May 2011 to shareholders on the Register as at 1 April 2011 (the ex-dividend date being 30 March 2011).
Following consultation with the active members of the defined benefit pension scheme, an agreement was reached to close the Delcam Retirement Benefits Scheme to further accrual from 31 December 2010. An alternative scheme, the Delcam Defined Contribution Pension Scheme has been made available to all UK-based employees. Coinciding with the closure of the Delcam Retirement Benefits Scheme, the Company paid a lump sum of £2.5 million into this scheme in January 2011, and made a commitment to pay £0.5 million each year from January 2012 to January 2016 inclusive. The Company would like to thank staff affected by the change in the pension scheme for their assistance and cooperation during this transition.
The continuing recovery in global manufacturing has benefited Delcam’s business. Sales of new software licences and maintenance contracts increased across our CAD/CAM products. Our European and North American subsidiaries all increased their sales and our new subsidiary in Poland, established in the third quarter of 2009, continued its promising start. Within Asia, we saw strong growth in our newer markets, including China and India, coupled with a good recovery in our more established territories, including Korea and Japan.
In September, we announced that Southern Spars, a New Zealand-based company specialising in the design and construction of spars and rigging for high-performance yachts, had become the 35,000th customer to purchase our software. Other landmark orders announced in 2010 came from Core 3D Centers, our 10,000th customer in North America, and Zhejiang (Taizhou) Jianli Mould Co. Ltd, our 1,500th customer in China.
With effect from 1 January 2011, we have combined our Tooling Services Division, which delivered a weaker performance in 2010 than in 2009 (following the completion of a major contract), with our Professional Services Group. We expect that this integration with our consultancy activities will support growth in the level of business for our process development and prototype manufacturing activities.
We were pleased to again be ranked as the world’s leading CAM specialist in CIMdata Inc’s most recent market report, published in June 2010. This leading independent global consultancy also reported that Delcam shipped more industrial seats of CAM software than any other supplier during 2009.
Early in the year, we launched our own online TV channel, Delcam TV, on www.delcam.tv. This includes a range of customer testimonials from many of the industries in which we operate. The site also features videos showing the latest developments in our software, plus demonstrations for our users to further improve their productivity.
Results for 2010 were pleasing, even allowing for the general improvement in the global economic environment. The current indications are that 2011 will see companies in most of our major territories increase their investments in capital equipment and the associated software and, against this backdrop, the business is well placed to benefit. However this trend may be affected by recent events in Japan and in the Middle East. At this early stage in 2011, the growth in our sales is continuing and, if this remains the case, we are optimistic that our trading results for the coming year will show further improvement over those for the last twelve months.
I would like to thank all our staff worldwide for their loyalty, hard work and dedication during the year, which enabled our record level of sales to be achieved.