Annual Report 2006

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Preliminary Results for the year ended 31 December 2006

 

2006

2005

Sales

£26.7m

£23.5m

+13.9%

Pre-tax profit

£2.6m

£2.3m

+9.6%

Basic earnings per share

33.5p

32.3p

+3.7%

Final dividend

3.8p

3.4p

+11.7%

Total dividend for year

5.0p

4.5p

+11.1%


  • Record annual sales of £26.7 million against £23.5 million in 2005
  • Dividend increased from 4.5p to 5.0p for the year with confidence for the future
  • Continued high level of investment in R&D of £7.3 million in the year, matched by maintenance revenues of £7.1 million increasing by 10% during the year
  • Benefits of acquisition of Feature CAM software range, acquired March 2005, coming through
  • Two additional software businesses acquired in year:

- July 2006, US-based International Manufacturing Computer Services Inc.

- December 2006, UK-based Crispin Systems Limited

- to have significant impact on profitability in future years

  • Further progress in expanding into new markets – especially aerospace and dental industries
  • Proposed placing – see separate announcement issued today
  • Released improved versions of all main software products, contributing to record levels of software and maintenance revenue
  • Prospects encouraging
 


I am pleased to announce very encouraging results for the financial year to 31 December 2006, where revenue and profits have increased to record levels. These results are especially creditable given the background of dollar weakness and reflect the strength of our offering and our reputation.

We continue to make acquisitions of software ranges that enhance our existing portfolio and over the year, acquired two businesses, one in the US, which strengthens our presence there and one in the UK, which gives us an unrivalled CAD CAM software offering for the worldwide footwear industry.

The levels of activity for the opening months of 2007 are in line with our expectations. We are confident that we will see further growth during this year, provided that the US economy does not weaken significantly, with the consequent implications for the global economy. ”

Tom Kinsey, Chairman

STATEMENT BY THE CHAIRMAN, TOM KINSEY

 

Introduction

I am pleased to announce very encouraging results for the financial year to 31 December 2006 where revenue and profits have increased to record levels. These results are especially creditable given the background of dollar weakness and reflect the strength of our offering and our reputation.

Financial Highlights

Group sales for the year to 31 December 2006 rose by 14% to £26.7 million from £23.5 million in 2005. Profit before tax increased by 10% to £2.56 million from £2.34 million and basic earnings per share rose by 4% to 33.5p from 32.3p last year. These record results were driven by good growth in software licence sales in our core Power Solution range of software and by the acquisition of additional software ranges, namely FeatureCAM, which we acquired in July 2005, and PartMaker, which we acquired in July 2006. Maintenance revenues increased by 10% to £7.1 million and now represent 27% of Group revenues. Our maintenance revenues represent high quality, recurring earnings and provide us with good earnings visibility looking forward.

The Group remains highly cash generative with net cash inflow from operating activities in the period of £2.5 million (2005: £2.9 million).

Dividend

The Board is pleased to propose a final dividend of 3.8p per ordinary share (2005 – 3.4p), making a total for the year of a 5.0p per share (2005 – 4.5p), an increase of 11%. The final dividend will be paid on 18 May 2007 to shareholders on the Register as at 26 April 2007 (ex-dividend date being 24 April 2007).

Review

The Group made good progress over the year. We continue to make acquisitions of software ranges that enhance our existing portfolio of products. In July 2006, we acquired the assets of US-based International Manufacturing Computer Services Inc., the developer of the PartMaker suite of CAM software for a total consideration of up to £2.5 million, dependent on performance. The PartMaker software is a world leader in programming for turn-mill and Swiss-type machines and we will be marketing the product worldwide through our network of over 250 subsidiary and reseller offices. In late December 2006, we purchased UK-based Crispin Systems Limited, a leading supplier of CADCAM systems to the footwear industry. The addition of Crispin's software products means that we will be able to provide an unrivalled range of solutions in the footwear marketplace, including the first complete solution for the design and manufacture of both uppers and soles. Further benefits from these acquisitions should be seen in next year’s results.

Last year, in March 2005, we acquired US-based CAM software specialists, Engineering Geometry Systems, the developer of the FeatureCAM software line. Ov er the course of this year, we have been focused on expanding its sales outside the US, especially into Asia and we are making steady progress. The momentum generated and the resources that are now in place should result in further progress in the coming years. A similar process is now underway with PartMaker, which currently has limited sales outside the USA. As with the addition of FeatureCAM, the acquisition of PartMaker also gives Delcam a stronger presence in the USA, the world’s largest market for CADCAM software.

Group sales can be split broadly into three territories; Europe, the Far East and the Americas. On a pre-acquisition basis, software licence sales in Europe, including our subsidiaries in the UK, France, Germany and Italy, grew by 12% over last year to £2.7 million. Similarly software licence sales in the Far East grew by 6% to £3.0 million, with Thailand, Indonesia and India showing the greatest growth. It was pleasing to see that our largest reseller in the region, Hankook Delcam in Korea, returned to growth. While sales in China continued to increase, we experienced more intense competition, which kept the growth below our expectations. In North America, like-for-like software licence sales were flat at £1.2 million as difficulties in the domestic automotive industry fed through into lower investment in software.

We continue to ensure that our products remain industry-leading through significant investment in research and development and believe this policy will ensure higher sales over the longer term. Our R&D investment over the year was £7.3 million (2005: £6.5 million) and we released improved versions of all of our main software products during the period. The value that our customers place in these enhancements is reflected in the record levels of income from maintenance contracts. This revenue now broadly covers our overall investment in product development.

Several years ago, we began a diversification strategy to reduce our dependence on the mould and die industry. It is particularly pleasing to report our progress in the aerospace industry. As well as significantly increasing our software sales in this sector, our Professional Services Group has been able to develop valuable business with leading engine and airframe manufacturers. The dental industry is another area where we have had initial success and expect to see further growth following the introduction of Dentmill, a dedicated version for the sector of our PowerMILL CAM program.

One of our main objectives for the year was to further strengthen our relationships with suppliers of machine tools and other related equipment. The success of these initiatives was most clearly seen at the IMTS exhibition in Chicago, where Delcam software was featured on more than 30 partner stands.

Outlook

The levels of activity for the opening months of 2007 are in line with our expectations. We are confident that we will see further growth during this year, provided that the US economy does not weaken significantly, with the consequent implications for the global economy.

I would like to thank all our staff worldwide for their loyalty, hard work and dedication during the year.

Proposed placing

The company also announced today that it has conditionally placed 1,524,052 new ordinary shares in the company with Renishaw plc, to raise approximately £6.1 million before expenses. The placing will require the approval of the shareholders. Consequently a circular to shareholders explaining the proposed placing and giving notice of an extraordinary general meeting to be held on 23 April 2007 is being posted to shareholders today.

T R M KINSEY

Chairman


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