Delcam Plc Interim Report 2009
Interim Results for the six months to 30 June 2009
- Very challenging market conditions with manufacturer customer base deferring software spend
- Sales of £16.1m (2008: £16.9m)
- Recurring maintenance revenues, derived from software maintenance and support contracts, increased by 13% to £5.8m (2008: £5.1m), representing 36% of total sales
- Strategic decision to continue to maintain high level of software R&D investment for market advantage - £4.7m invested in the period (2008: £4.5m)
- Pre-tax tax profit of £0.3m (2008: £1.4m)
- Basic earnings per share of 3.2p (2008: 14.9p)
- Net cash of £5.8m at 30 June 2009 (2008: £6.4m)
- Interim dividend maintained at 1.35p (2008: 1.35p)
- Board remains confident of Delcam’s ability to build market share during the downturn
Reflecting the global financial and economic crisis, the trading environment in 2009 has been challenging and the impact of the downturn in the manufacturing sector has been even harder than we initially anticipated at the end of last year. However, as we stated in our 2008 annual report, given Delcam’s strong financial position and high level of recurring income, we believe that the business is well placed to see out the near-term challenges. In particular, we are continuing to invest significantly in product development and marketing. This provides us with an increasing commercial advantage and will help to support our ambitions to build our market share during the downturn.
Against a very difficult trading backdrop, results for the first half of the financial year, traditionally our weaker trading period, are in the circumstances pleasing. Our strong global distribution channels and our diversification into a broader range of industries, in particular into the medical, dental and footwear sectors, continue to help to underpin our performance.
Sales for the six months to 30 June 2009 were £16.1 million compared to £16.9 million in the first half of last year. Income from maintenance revenues, derived from software maintenance and support contracts, increased to £5.8 million over the period from £5.1 million in the first half of last year. This recurring, highly predictable revenue stream accounted for 36% of revenue.
In line with our strategy, the Company continues its investment in product development at the high levels we believe to be necessary for our long-term success. This resulted in £4.7 million (2008: £4.5 million) being invested over the period.
Profit before tax for the period amounted to £0.31 million compared with £1.42 million during the first six months of 2008 and basic earnings per share were 3.2p against 14.9p last year.
The balance sheet remains strong with net cash of £5.8 million (31 December 2008: £6.4 million).
We are pleased to declare a maintained interim dividend payment of 1.35p per ordinary share (2008: 1.35p). This will be paid on 28 September 2009 to shareholders on the Register as at 11 September 2009. The ex-dividend date is 9 September 2009.
The reduction in global manufacturing has affected new sales across the full range of Delcam’s products. Many of our software sales are made to companies that are expanding their manufacturing capacity. With many companies postponing their investments in capital equipment, it is to be expected that the associated software sales should also be delayed. While this represents the general global picture, revenues from India and China have continued their growth, albeit at a lower rate than in recent years. Revenues from our international business have been insulated to a certain extent by the depreciation of Sterling against the US Dollar and the Euro. However, Sterling’s weakness also resulted in higher administrative expenses in our overseas subsidiaries. The overall net benefit of its depreciation was therefore reduced somewhat.
Income from software maintenance and support services from our existing customers continues to grow strongly. This reflects the high value that our users place on the regular enhancements to our software products and on the high level of service support they receive from our organisation.
Sales of our newer software products for the medical, dental and footwear industries continue to show encouraging growth. We believe that these markets represent very good growth areas for us and have increased the proportion of our development and marketing resources devoted to them. Our experience and expertise in developing software for the design, machining and inspection of complex shapes can be transferred to the benefit of these new customers and used by them to reduce their production costs, shorten their lead times and improve the quality and consistency of their manufacturing processes.
We have continued to increase the investment in our Professional Services Group and our Tooling Services Division which work together to provide process development and pre-production manufacturing services. In February, we opened an Asian Division of the Professional Services Group based in Singapore and have added a new large five-axis machine tool in the Tooling Services Division.
We are pleased that the latest industry survey, published by independent global consulting analysts, CIMdata, shows that we have moved up to third place in the overall rankings of developers of NC software and services and have strengthened our position as the world’s leading specialist supplier of CAM software.
New Managing Director
At Delcam’s Annual General Meeting in May 2009, we were delighted to announce that Clive Martell, the Company’s Operations Director, would be taking up the role of Managing Director on 1 August 2009. Clive was previously responsible for the day-to-day management of the Company’s operations worldwide. His appointment as Managing Director followed Hugh Humphrey’s decision to retire from that position after 20 years’ stewardship. We are pleased that Hugh is remaining on the Board as an Executive Director and Deputy Chairman. These role changes have now taken effect.
The current global economic uncertainty makes it harder than usual to predict how well the Company will perform in the second half and especially in the last quarter, which historically is our most important trading period in the year. However, we anticipate an improvement in profitability in the second half of the year. Our strong balance sheet, broad portfolio of existing products and new products scheduled for release during the remainder of the year mean that we are well positioned to respond to any increase in manufacturing activity. In addition, we believe that the spread of our activities across a diverse range of industries and geographic territories will help us to perform better than many of our competitors.
Looking further ahead, we continue to view long-term prospects for the Company positively
28 August 2009