Delcam Plc Interim Report 2011
Interim Results for the six months to 30 June 2011
- Strong results reflect the improvement in global trading conditions, Delcam’s international reach and strong product offering
- Sales up 13% to £20.1m (2010: £17.8m, as restated) – representing the strongest six-month sales in the Company’s history
- Recurring sales (from software maintenance and support contracts) up by 10% to £6.6m (2010: £6.0m). Recurring income now accounts for 33% of Group sales
- R&D investment of £5.4m – will support ongoing expansion (2010: £5.0m)
- Pre-tax profit up 87% to £1.5m (2010: £0.8m, as restated)
- Basic earnings per share up 102% to 17.6p (2010: 8.7p, as restated)
- Unrestricted net cash up to £10.0m (2010: £6.5m)
- Interim dividend of 1.75p (2010: 1.35p), an increase of 30%
- Industry survey of CAM vendors ranked Delcam as third largest CAM provider globally
(with market share of 6.7%) and the leading specialist provider by sales
- Well-positioned for key Q4 trading period but impact of current global financial markets difficult to judge with certainty
Results for the first six months of the financial year are very good, showing record sales for a six-month period and a significant uplift in pre-tax profits.
Sales have increased by 13% over the same period last year to £20.1 million. This new level continues the rising trend in sales we have experienced since the beginning of 2010, with new highs in sales recorded for each of the last three six-month periods. Pre-tax profits have grown significantly to £1.5 million, an increase of 87% over the first half of last year.
These very encouraging results reflect the improved performance in most of the territories in which we operate and have been supported by our established strategy of investing significantly in product development and marketing in order to gain long-term commercial advantage.
The Company’s financial position remains very robust, with unrestricted net cash at 30 June 2011 standing at £10 million. This leaves the business very well placed to continue its growth, both in absolute terms and in market share.
Sales for the six months to 30 June 2011 increased by 13% to £20.1 million, compared to £17.8 million (as restated) in the first half of last year. This principally reflects the continued improvement in software licence sales. Maintenance revenues, derived from software maintenance and support contracts, also grew significantly, contributing £6.6 million to the total, up by 10% from £6.0 million in the first half of last year. Accounting for 33% of overall revenues, maintenance revenues continue to represent a highly predictable recurring income stream for the Company.
In line with our growth strategy, the Company continued to increase its investment in product development and invested £5.4 million (2010: £5.0 million) over the period.
Profit before tax for the first half rose to £1.5 million, a rise of 87% on the £0.8 million generated in the first six months of 2010. Basic earnings per share also improved significantly, by 102% to 17.6p against 8.7p in the equivalent period of last year.
The balance sheet remains strong, with net cash of £11.1 million at the period end (2010: £6.5 million) and unrestricted net cash at £10.0 million (2010: £6.5 million). This is after a £2.5 million payment into the Company pension scheme in January 2011 to reduce the deficit and includes £0.9 million from the share placing which took place in April 2011 to satisfy institutional demand.
We are pleased to declare an increased interim dividend of 1.75p per ordinary share (2010: 1.35p), a rise of 30% on last year. This will be paid on 16 September 2011 to shareholders on the Register as at 2 September 2011. The ex-dividend date is 31 August 2011.
Delcam has been able to take advantage of the continuing recovery in global manufacturing to increase both the sales of new software licences and the take-up of maintenance contracts, especially in the automotive and aerospace industries. The strongest overall sales have come from the USA and Germany, with the fastest growth in sales of new software licences coming from Asia, in particular from China, Korea, Indonesia and India.
Our continued investment in product development has allowed us to release new versions of many of our products already this year. Further major releases are planned for the EMO World of Metalworking exhibition in September, the year’s largest exhibition for the machine tool industry.
Our marketing investment has also increased and we now have a presence at the major exhibitions, meeting existing and prospective customers across all the major territories and industry sectors in which we operate. Our investment in our online presence has allowed us to begin the introduction of updated websites for all of our products and to increase the range of videos on our www.delcam.tv online television channel. These online resources continue to provide a growing percentage of the enquiries for our solutions.
We organised the first International Custom Orthotic Insoles Technology Forum at Bath University in April. This attracted both existing and potential users of our solutions for this industry and has raised our profile considerably. Following this success, we are planning to make the Forum an annual event.
The combination of our Professional Services Group and our Tooling Services Division into the Delcam Professional Services subsidiary at the beginning of the year has received a positive response from clients.
In April 2011, we were delighted to receive the Queen’s Award for Enterprise in the International Trade category. The Award, widely viewed as the UK’s most prestigious commercial award, specifically acknowledged Delcam’s consistent growth in international sales over the six year period from 2005 to 2010. It is Delcam’s third award in the International Trade Category and our sixth Queen’s Award in total, having previously received three Queen’s Awards in the Innovation category for our manufacturing and inspection software.
More recently, in early August, in the latest report on CAM software vendors published by US consultancy, CIMdata Inc, Delcam was named as the third largest CAM software vendor globally in 2010, with a market share of 6.7% up from 6.5% in the prior year. This marks the third consecutive year in which Delcam has been ranked in third position. In the same report, CIMdata confirmed Delcam’s position as the leading CAM specialist globally (i.e. its primary business is focused on the provision of CAM software and services), with Delcam achieving the highest vendor revenues and end-user payments of all CAM-centric companies, a position which the Company has now held for 11 consecutive years.
First half sales were encouraging and we remain optimistic that the improvement will continue for the remainder of the year. Historically, strong machine tool sales, at the level that have been reported for the year so far, are followed by higher levels of software sales. We expect that this trend will again be seen this year. As we have previously noted, the final quarter of the year is traditionally our most important trading period and, while we remain confident about the strength of Delcam’s software offering and the global reach of our distribution channels, at this stage in the year, the impact of the current global financial markets on our performance remains difficult to judge with certainty. Notwithstanding this, the Company remains both financially strong, with £10 million in cash, and operationally well-positioned for growth.
24 August 2011