Delcam Plc Interim Report 2013

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Interim Results for the six months to 30 June 2013

  • Record half-year results
  • Revenues up 9% to £25.0m (2012: £22.9m) – 7th consecutive six-month period of record revenues
    - Software licence revenues up 10% to £12.7m
    - Recurring income (from maintenance and support contracts) up 18% to £8.1m, representing 32% of total revenues
  • Pre-tax profit up 35% to £2.8m (2012: £2.1m)
  • Basic earnings per share up 18% to 30.8p (2012: 26.2p)
  • Unrestricted net cash of £11.2m (30 June 2012: £12.2m; 31 December 2012: £10.3m)
  • Interim dividend of 3.25p (2012: 2.50p), an increase of 30%
  • R&D expenditure of £5.8m (2012: £5.6m) – to support long-term commercial advantage
    - Launch of robot interface product, which simplifies programming of robots for machining operations
  • Expansion of global sales network with new subsidiary in Mexico and new sales office in Illinois, USA
  • Delcam ranked as third largest CAM software provider globally (and leading specialist supplier) in annual industry survey by CIMdata Inc.
  • Board remains optimistic about prospects for the full year

Chairman's Statement

These excellent results were helped by improved performances across most territories and by our continuing strategy of investing strongly in both product development and marketing in order to position the Group for long-term market advantage.

We remain optimistic that our strong trading will continue in the second half. As in previous years, the final quarter of the year will be our most important trading period and so will influence the outcome for the year as a whole.

We continue to be very positive about our prospects, since we believe that the combination of our strong product offering, increasing automation in manufacturing and our broad range of markets, both geographically and in the number of industries we serve, offers the Group very good scope for further growth.

Financial Results

Sales for the six months to 30 June 2013 increased by 9% to £25.0 million, compared to £22.9 million in the first half of last year.  This result was supported by growth in both software licence sales and maintenance revenues. Software licence sales rose by 10% to £12.7 million from £11.6 million in the same period in 2012 while maintenance revenues, derived from software maintenance and support contracts, contributed £8.1 million, up by 18% from £6.8 million in the first half of last year. Maintenance revenues continue to represent a predictable recurring income stream and accounted for 32% of overall revenues, an increase from the 30% achieved in 2012. Services revenue increased by 9% to £3.1 million and other revenues decreased by 34% to £1.1 million reflecting a £0.5 million reduction in low-margin hardware sales. 

Geographically, the Group’s revenues are split between Europe at 51% of the total, Asia at 26% and the Americas at 23%.  We now have approaching 45,000 customers.

Gross profit increased by 15% to £24.2 million over the period, compared to £20.9 million in the first half of last year, helped by favourable currency gains and a reduction in hardware cost of sales. 

As a result of further expansion of the sales channel and recognition of the costs of the new subsidiaries in Australia, Turkey and Mexico, distribution costs increased by 25% to £6.6 million.

Our R&D spend continues to reflect the importance we place on ensuring that our software offerings represent the most effective solutions for the specific sectors we target.  Over the period, we invested £5.8 million (2012: £5.6 million) in our development programme and launched new releases of most of our products.  Administrative expenses increased by £0.8m to £8.9m, reflecting increased investment in our new offices as well as a one-off cost relating to legacy employment issues.

Profit before tax for the first half rose by 35% to £2.8 million from the £2.1 million generated in the first six months of 2012, helped by improving operating profit margins but also by the foreign exchange gain noted above. Basic earnings per share rose by 18% to 30.8p against 26.2p in the equivalent period of last year.  The tax rate is higher in the period at 15% due to the reduction in the deferred tax asset of £0.3 million, relating to £1.3 million of tax losses utilised in the period. 

Our cash flow performance was again very strong, with cash generated from operating activities of £4.0 million significantly higher than operating profit of £2.7 million. The 25% growth in our deferred income balances to £8.4 million from £6.7 million last year was a major contributor to this, reflecting the growth in our maintenance revenue stream.

The balance sheet remains robust with net assets increasing 20% to £19.9 million from £16.6 million last year.  Unrestricted net cash at 30 June 2013 stood at £11.2 million at the period end (30 June 2012: £12.2 million and 31 December 2012 £10.3 million), after a £1.4 million purchase of Delcam’s shares to service employee share schemes. 

Dividend

We are pleased to declare an interim dividend of 3.25p per ordinary share (2012: 2.50p), which represents an increase of 30% over the prior period. This will be paid on 9 September 2013 to shareholders on the Register as at 23 August 2013.  The ex-dividend date is 21 August 2013.

Review

This is the seventh consecutive six-month period of record sales and the Group generated good sales growth from both new software licences and the take-up of maintenance contracts. 

The strongest overall results continue to come from the USA, the UK, Germany, Italy and China.  We saw good growth from our subsidiaries in Canada, France and India, and from our associates in Korea and Thailand.

We strengthened our global network of offices in the period, creating a subsidiary in Mexico to take advantage of the high potential for us in the region, especially given its growing automotive and aerospace industries.  In addition, we established a direct presence in Illinois with the acquisition of our reseller.

Many of our existing global offices added extra sales and support staff during the year to meet the growing demand for our software.  It is encouraging that the main events we organise annually for our sales channel, our Sales Partner Conference and our five regional Technical Sales Partner Meetings, are attracting record attendances.

We have already released new versions of most of our products this year, with our on-going investment in product development enabling significant enhancements to our software.  Notably, these releases included the launch of our PowerMILL Robot Interface, which simplifies the programming of robots for machining operations, an area where we are seeing increasing demand. The launch of this robot product was supported by our leadership of the COMET project, a collaborative programme established to increase the accuracy of machining with robots and involving fourteen European organisations, with co-funding by the European Commission.

We plan further major releases of our software at the EMO manufacturing exhibition, the world’s largest trade show for industrial equipment and productivity, to be held in Hannover, Germany, in September.

Our Delcam Professional Services subsidiary continued to grow, winning a number of significant contracts for its consultancy and prototype manufacturing services from the aerospace industry.

We were delighted that for the fifth year running we were confirmed as the third largest CAM software provider globally in 2012, with our share of the CAM marketplace at 7.3%.  The confirmation came in the latest NC Software Market Analysis Report from leading US analysts, CIMdata.  The report also named Delcam as the leading specialist supplier of CAM software globally for the thirteenth consecutive year and estimated that the total value of CAM software and services purchased by end-users grew by 5.9% in 2012.

Outlook

The first half results are encouraging. We remain optimistic that our strong trading will continue in the second half. As in previous years, the final quarter of the year will be our most important trading period and so will influence the outcome for the year as a whole. 

We continue to be very positive about our prospects, since we believe that the combination of our strong product offering, increasing automation in manufacturing and our broad range of markets, both geographically and in the number of industries we serve, offers the Group very good scope for further growth. 

Peter Miles
Chairman
12 August 2013