Delcam Plc Interim Report 2007
Interim Results for the six months to 30 June 2007
- Record half-year sales of £14.5 million (2006: £13.2 million) – reflecting benefits of acquisitions of additional software ranges
- Pre-tax profit of £1.26 million (2006: £1.31 million) despite £0.35 million negative impact of US dollar exchange rate.
- Balance sheet remains very robust with net cash of £4.5m at 30 June 2007
- Interim dividend increased by 4.2% to 1.25p (2006: 1.2p)
- £6.1 million investment in the Group by Renishaw plc completed in April 2007
- Continued high level of investment in software R&D
- Position as largest specialist supplier of Numerical Control (“NC”) software and services confirmed by US analyst, CIMdata
Peter Miles, Chairman, commented,
“In my first statement as Chairman, I am pleased to report that the business remains in good shape and, as the results demonstrate, we are seeing the benefits come through of the acquisitions of two software ranges we made in 2006. The new ranges add additional breadth to our product offering and we are in a good position to leverage future sales growth through our global distribution network.
Delcam’s cash generation and net cash position remain strong. However, profitability has been impacted by the continuing deterioration in the US dollar exchange rate and looking ahead, while we remain positive about Delcam’s prospects, the extreme weakness of the US dollar will continue to affect us. Nevertheless, we will continue to invest in our software products, which will benefit Delcam and its shareholders in the future.
I am pleased to be making my first Chairman’s Statement, having been appointed as Chairman to the Board on 15 May 2007 following the retirement of Tom Kinsey. I would like to thank Tom for his invaluable support over the last seventeen years. The Directors are especially grateful to have benefited from Tom’s experience and guidance, which has contributed to a six-fold increase in sales.
Sales for the six months to 30 June 2007 achieved a record level for a half-year at £14.5 million compared with £13.2 million in the first half of last year. This represented an increase of 9.8% and largely reflected the benefit of the addition of two software ranges, namely PartMaker, acquired in July 2006, and Crispin, acquired in December 2006.
The deterioration in the US dollar exchange rate adversely affected profitability, impacting by approximately £350,000. Profit before tax for the first half was therefore £1.26 million against £1.31 million last year, while basic earnings per share were 16.1p compared with 18.4p in the equivalent period last year.
With net cash inflow from operating activities of £1.4 million in the first six months, the balance sheet remains robust with net cash of £4.5 million. The Company continues to invest in the future, with £4.1 million invested in R&D over the period (2006: £3.7 million).
The Board is pleased to be paying an interim dividend of 1.25p per ordinary share, representing an increase of 4.2% over last year (2006: 1.20p). This will be paid on 20 September 2007 to shareholders on the Register as at 7 September 2007.
Renishaw plc placing
At an EGM held on 23 April 2007, Delcam shareholders voted to accept an investment from leading metrology company, Renishaw plc, of £6.1m. This investment was effected through a placing of 1,524,052 new Delcam Ordinary Shares with Renishaw at £4.00 per share.
Renishaw and Delcam have worked together for many years and share common metrology interests and customers. We believe that closer cooperation with Renishaw will enhance the sales of both companies, in particular through initiatives such as our agreement to develop software to support the application of Renishaw’s new inspection probes. The proceeds of the placing will help to fund Delcam’s continuing growth.
Following the placing, we were pleased to appoint Renishaw director, Geoffrey McFarland, as a non-executive director of Delcam.
The growth in sales principally reflects the emerging benefits of the two software ranges, PartMaker and Crispin, which we acquired respectively in July and December 2006. As predicted, the acquisition of the Crispin range of software has consolidated our position as the leading supplier of CADCAM software to the footwear industry. Most of the leading international shoe companies now use Delcam software.
It is also pleasing to note that we saw increased demand for the FeatureCAM family of products which we acquired in July 2005. Prior to its acquisition, FeatureCAM was predominantly sold in the US. Through our global sales network, we are now able to leverage sales into additional geographic markets for this high quality software range. We expect to increase sales of PartMaker and Crispin in a similar way.
Sales growth in the period was strongest in our subsidiaries in Germany and France, which both won significant new business to give growth rates well ahead of their local markets. Our operation in Indonesia, our reseller in Australia and our business in Russia also performed well. In contrast, our joint venture in Korea has been affected by the poor short-term economic conditions and sales in Thailand have been affected by the current political uncertainty in the country.
Some of our North American resellers continue to be affected by the problems being experienced in the local automotive industry, although other parts of our business in North America have continued to make progress. A key focus in North America has been the consolidation of our operations to create a single sales, support and marketing structure for our Power Solution, ArtCAM and FeatureCAM product ranges, in place of the previously independent USA and Canadian activities. We believe that this will make the best use of the skills of our personnel, expand our business opportunities and provide the best possible service to our customers.
We have continued to expand our Professional Services Group to meet the growing demand for its consultancy expertise, especially from aerospace engine manufacturers and from companies that machine aerostructures. In addition, we have begun similar operations in France and the Netherlands to develop opportunities in mainland Europe.
We are pleased that the latest rankings published by the US analyst, CIMdata, show that our increased sales have consolidated our position as the world’s number one specialist supplier of NC software and services, with our market share increasing to 11% of the total world market. The survey also showed that Delcam operates the largest CAM software development team of any supplier and was the largest supplier to the global mould, tool and die industry. Our strong balance sheet leaves us well placed to take advantage of the anticipated future consolidation in the sector.
The normal yearly business pattern for Delcam is to achieve higher sales and profits in the second half of the year than in the first half and the Directors expect the outcome for the current year to reflect this traditional weighting. However, with more than 50% of Delcam’s revenue being undertaken in US$, the current weakness in the currency will continue to affect the value of our sales and profitability. Nevertheless, we will continue to invest in our software products, which will benefit Delcam and its shareholders in the future.
24 August 2007
The Group intends to adopt International Financial Reporting Standards (IFRS) for the year ended 31 December 2007 and has prepared this interim report in accordance with the accounting policies that will be adopted at that date. As a result, comparative figures in respect of the period ended 30 June 2006 and 31 December 2006 have been restated. A reconciliation between the comparative figures included and those previously reported is set out in the notes to this report.