Corporate Industries

Annual Report 2007

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Preliminary Results for the year ended 31 December 2007

 

2007

2006

Sales

£29.7m

£26.7m

+11.2%

Pre-tax profit

£2.15m

£2.79m

-7.7%

Basic earnings per share

24.6p

38.2p

-6.4%

Final dividend

4p

3.8p

+0.5%

Total dividend for year

5.25p

5.0p

+0.5%


  • Robust trading performance which reflects:    

        - organic growth of Delcam software range

        - benefits of software ranges acquired in 2006 coming through

 
  • Record sales of £29.7m, an increase of 11% (2006: £26.7m):

        - European software sales performed particularly well

        - emerging economies - China, India, Russia and South America - achieved good growth

 
  • Profit before tax of £2.15m (2006: £2.79m):

        - weak dollar impacted profit by more than £0.5m

 
  • Basic earnings per share of 24.6p (2006: 38.2p) – dilution effect of Renishaw plc placing
 
  • Maintenance income (from licence fee renewals) up by 10% to £8.1m (2006: £7.4m)

        - represents 27% of Group revenues

 
  • Continued investment in R&D of £7.8m (2006: £7.3m)

        - maintains Delcam’s market leading position for its software ranges

 
  • Net cash of £5.3m at year end (2006: £(0.7m))
 
  • Final dividend of 4p proposed, making total for the year of 5.25p (2006: 5.0p)
 
  • £6.1m investment by Renishaw plc, leading UK metrology company, completed in April

        - now working together on new software initiatives

 
  • Diversified product range and customer base positions business well for long term growth
 

Peter Miles, Chairman, commented,

“I am pleased to report that the business has performed robustly. Results for the financial year to 31 December 2007 show that sales reached record levels. With more than half of Delcam’s global sales undertaken in the US$, results are especially creditable given the background of US dollar weakness, which adversely affected sales and profitability, and our results demonstrate the high quality of our software offering and the diversified spread of our business across the many industries in which we operate.

We have had an encouraging start to the current year but we will not be immune to any global downturn in economic activity. However, by offering our wide range of products and services across a number of industries, we are in a position to capitalise on the variety of opportunities available to us. We continue to view prospects for the business over the long term very positively.”

STATEMENT BY THE CHAIRMAN, PETER MILES

 

Introduction

In my first Annual Report as Chairman, I am pleased to report that the business has performed robustly.  Results for the financial year to 31 December 2007 show that sales reached record levels.  This growth has been achieved partly as a result of the addition during 2006 of the PartMaker and Crispin families of software to the Delcam range and partly through increased organic growth of existing Delcam products.

With more than half of Delcam’s global sales undertaken in the US$, results are especially creditable given the background of US dollar weakness, which adversely affected sales and profitability.  The impact of the weak dollar reduced Group profit by in excess of £0.5 million.  The robustness of our results demonstrates the high quality of our software offering and the diversified spread of our business across the many industries in which we operate.

Financial Highlights

The Group has adopted International Financial Reporting Standards (IFRS) for the year ended 31 December 2007 and, accordingly, comparative figures in respect of the period ended 31 December 2006 have been restated.  Although IFRIC 14 has not yet been endorsed by the EU, the Group has also adopted the prudent accounting practices of IFRIC 14 early and not recognised the IAS 19 pension surplus of £1.7 million for the year ended 31 December 2007.

Group sales for the year to 31 December 2007 rose by 11% to £29.7 million from £26.7million in 2006.  As previously stated, the weak dollar significantly impacted profitability and profit before tax was £2.15 million compared with £2.79 million in 2006.  Following the issue of new shares as a result of the investment by Renishaw plc detailed below, basic earnings per share fell to 24.6p from 38.2p last year.  Maintenance revenues increased by 10% to £8.1 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 year of £2.4 million (2006: £2.4 million).  After £1.7 million spent on capital expenditure, the Group’s net cash was £5.3 million (2006: £(0.7) million).  We remain committed to investing in ongoing research and development which ensures that our software offerings remain market-leading within our chosen sectors.  As our product range has grown so has our R&D investment.  Over the year, R&D investment totalled £7.8 million (2006: £7.3 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. 

The Group’s strong balance sheet gives the Group the flexibility, particularly in the current economic climate, to pursue opportunities which may arise to acquire complementary businesses or products. 

Dividend

The Board is pleased to propose an increase of the final dividend to 4.0p per ordinary share (2006: 3.8p).  This makes a total for the year of 5.25p per share (2006: 5.0p), an increase of 5% on last year.  The final dividend will be paid on 16 May 2008 to shareholders on the Register as at 4 April 2008 (the ex-dividend date being 2 April 2008).

Renishaw plc Placing

At an EGM held on 23 April 2007, Delcam shareholders voted to accept an investment of £6.1m from leading UK metrology company, Renishaw plc.  This investment was effected through a placing of 1,524,052 new Delcam Ordinary Shares with Renishaw at £4.00 per share.  Following the placing, we were pleased to appoint Renishaw director, Geoff McFarland, as a non-executive director of Delcam. 

Renishaw and Delcam have worked together for many years and share common metrology interests and customers.  Since April, we have been working together on new software initiatives, including the development of software to support Renishaw’s new inspection probes.  We are also jointly looking at software applications for the dental and medical industries.

Review

The Group made good progress over the year.  We continue to grow the sales of our core CADCAM products and to expand the international distribution of the additional software ranges acquired during 2005 and 2006. 

The most impressive growth has been among our European subsidiaries in France, Germany and Italy, where sales across the three countries improved by over £1 million.  In North America, the management changes we implemented towards the end of 2006 have resulted in increased sales but this was overshadowed by the impact of the dollar weakness.  Other areas where we did well included the emerging economies of China, India, Russia and South America.

The addition of the Crispin range for footwear design and manufacture to our existing software has reinforced our position as the world’s leading supplier of software to the industry.  We are further broadening our offering in this area with the addition of software for orthotic and orthopaedic applications.  The acquisition of PartMaker has given us strength in the supply of systems for the programming of Swiss-type lathes and mill-turn machines and its addition now allows us to offer the widest range of industry-leading CAM software from any supplier.

2007 also saw continued growth in our Professional Services Group to meet the increasing demand for its consultancy expertise, especially from aerospace engine manufacturers and from companies that machine aerostructures.  In order to promote further growth in our Professional Services activity and in particular to develop opportunities in mainland Europe, we have begun similar operations in France and the Netherlands.  The Professional Services Group has worked closely with our Tooling Services Division on projects where it has developed processes that have been used for initial production in our in-house manufacturing facility.  To support a number of these projects, we have invested in a new mill-turn machine.  This additional capacity is already committed for the majority of 2008.

We continue to ensure that our software products remain industry-leading through significant investment in research and development and believe this policy will ensure higher sales over the longer term. 

Outlook

We have had an encouraging start to the current year but we will not be immune to any global downturn in economic activity.  However, by offering our wide range of products and services across a number of industries, we are in a position to capitalise on the variety of opportunities available to us.  We continue to view prospects for the business over the long term very positively.

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

PETER MILES

Chairman


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