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DLC

 

DELCAM PLC

('Delcam' or 'the Group')

Preliminary Results 

for the year ended 31 December 2008

Delcam is the UK's leading developer and supplier of advanced software solutions for product development and manufacture. Based in Birmingham, Delcam has more than 150 local support offices in over 80 countries worldwide. The Group's specialist software is used by more than 25,000 organisations, ranging from multi-national corporations to independent designers and toolmakers, across a wide variety of industries, including aerospace, automotive, ceramics, electrical appliances, footwear, medical, packaging, toys and sports equipment.  

Highlights

• Creditable performance over the year despite deteriorating trading conditions, reflecting:

-   quality of software offering

-  broad geographical distribution and presence across a wide variety of industries

• Sales of £32.9 million (2007: £29.7 million)

-  European subsidiaries performed particularly well, especially the German subsidiary

-  emerging economies of China, India and Latin America achieved good growth

• Maintenance revenues from software licence renewals increased by 20% to £9.7 million (2007: £8.1 million) 

-  represents 29% of Group revenues 

-  highly predictable, recurring income

• Profit before tax of £2.3 million (2007: £2.1 million)

• Basic earnings per share of 21.2p (2007: 24.6p)

• R&D investment of £8.8 million (2007: £7.8 million)

-  released improved versions of existing products 

-  introduced new products during the period 

• Net cash of £6.4 million as at 31 December 2008 (2007: £5.3 million)

• Proposed final dividend of 3.9p, making a total for the year of 5.25p (2007: 5.25p)

• Board considers Delcam to be well placed to weather the downturn

Peter Miles, Chairman, commented,

'The robust results achieved by the Group over the past financial year reflect the high quality software products that we continue to offer and the benefits of our diversified business, both in terms of our geographic reach and the many industries that we serve.

The next two years are going to be difficult but also an opportunity. The favourable exchange rate, strong cash position and high levels of predictable income present Delcam with a significant opportunity to increase our market share. During 2009, we plan to maintain our investment in product development and marketing, while continuing to exercise tight control over our day-to-day expenditure to take advantage of the recovery when it comes. 

We remain confident that our strategy will deliver business advantage and believe that Delcam is well placed to see out the near term challenges.'

Enquiries: 

Website: www.delcam.com

Delcam plc		Hugh Humphreys, Managing Director		T: 0121 766 5544
		Kulwant Singh, Finance Director
Biddicks		Katie Tzouliadis		T: 020 7448 1000
WH Ireland		David Youngman/ Robin Gwyn		T: 0161 832 6644

STATEMENT BY THE CHAIRMAN, PETER MILES

Introduction

I am pleased to report very robust results in a year which saw trading conditions deteriorate significantly, reflecting the global economic and financial downturn. These results reflect the high quality of our software offering and the diversified spread of our business, both in terms of our geographic reach and the many industries that we serve. 

Group sales for the financial year to 31 December 2008 recorded a new high. This increase was achieved partly as a result of further improvements in our recent acquisitions, the FeatureCAM, PartMaker and Crispin families of software, partly through the introduction of new software programs, and partly through further organic growth of longstanding Delcam products. While pre-tax profit increased by a smaller percentage, in a difficult year, we consider the increase to be satisfactory.  

Given the tougher economic environment, it is worth highlighting in our results, the high levels of recurring revenues the business generates through software maintenance income renewals. 

While the outlook for the business in 2009 is challenging, we consider that Delcam is well placed to weather the downturn.

Financial Highlights

Group sales for the year to 31 December 2008 rose by 11% to £32.9 million from £29.7 million in 2007. As previously stated, the global slowdown in the latter months of the year impacted profitability. Profit before tax was £2.3 million, including net currency gains of £0.4 million, compared with £2.1 million in 2007, representing an increase of 5%. Basic earnings per share were 21.2p from 24.6p last year. Maintenance revenues increased by 20% to £9.7 million from £8.1m last year and now represent 29% of Group revenues. Our maintenance revenues represent high quality, recurring earnings and provide us with good earnings visibility looking forward.  

We remain convinced that high levels of investment in ongoing research and development are essential both to ensure that our software offerings remain market-leading within our chosen sectors and to enable the introduction of additional products. As our product range grows, this level of investment becomes even more important. Over the year, R&D investment totalled £8.8 million (2007: £7.8 million). We released improved versions of all of our main software products during the period, as well as introducing new products. The value our customers place in these enhancements is reflected in the continued growth in income from maintenance contracts.

The Group remains cash generative with an increase in net cash from £5.3 million to £6.4 million.

In 2007, the IAS 19 valuation of the Delcam Retirement Benefits Scheme, the Group's defined benefit pension scheme, recorded a surplus of £1.7 million. This surplus was not recognised in the 2007 accounts but the equivalent valuation for 2008, of a deficit of £1.1 million, has been recognised as a liability at the year end. 

The Group's strong balance sheet gives it 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 a final dividend of 3.9p per ordinary share (2007 - 4.0p). This makes a total for the year of 5.25p per share (2007 - 5.25p), maintaining the dividend at the same overall level as last year. The final dividend will be paid on 15 May 2009 to shareholders on the register as at 14 April 2009. The ex-dividend date is 8 April 2009.

Review

The Group made good progress over the year. We further increased the sales of our core CADCAM products, expanded the international distribution of the additional software ranges acquired during 2005 and 2006, and introduced a number of new products. Our progress in such difficult times is a strong validation of the diversification policies which have been followed by the Group for a number of years, in particular in reducing our previous dependence on the automotive industry. We have successfully entered a number of new sectors, where we see potential for further expansion.

The most impressive growth continued to be among our European subsidiaries in France, Germany and Italy. Sales in Germany grew especially strongly, giving our German subsidiary the highest sales of any of our international network of sales partners. In North America, the impact of the poor economy was felt most severely, although this was offset to a certain extent by the strengthening of the US dollar against sterling. Other areas where we did well included the emerging economies of China, India and Latin America.

We continue to extend the international distribution of the software products we acquired with our acquisitions of FeatureCAM and PartMaker and increased training of both our sales and marketing staff. Together with our more established PowerMILL and ArtCAM products, we offer a broader range of machining software than any other supplier. This is a key factor in Delcam continuing to be ranked as the world's leading specialist supplier of CAM software in the rankings published by the American analyst CIMdata.

Our Crispin range of software for the footwear industry has been expanded with the addition of new dedicated programs for the design and manufacture of orthopaedic footwear. These have been received well by customers and should help reinforce our position as the main supplier of CADCAM software to the industry.

Another relatively new area that continues to show strong growth is the dental industry. We have been able to apply our broad design and manufacturing expertise to develop products that are becoming increasingly successful in this application.

We have expanded our Professional Services Group (PSG) in line with increasing demand for its consultancy expertise. Our major customers continue to be aerospace engine manufacturers and companies that machine aerostructures. Both of these are looking for efficiency savings by introducing new methods of manufacture. It is also pleasing to see that the Group is gaining new business in the power generation sector. We have established a new office in Singapore to follow up consultancy opportunities in Asia. The manufacturing process development work of PSG often leads to complementary opportunities for our Tooling Services Division to provide pilot production capacity to customers within Delcam's extensive multiaxis machining facility. Plans are under way to further expand this facility with the addition of another large machine tool during 2009.

Outlook

Our intention is to expand sales in our newer areas of activity, including Services and Healthcare, whilst also remaining the largest specialist supplier of software for computer controlled machines in the manufacturing industry. As the largest supplier, we will inevitably be affected by the downturn in manufacturing sales and reduced levels of confidence which are affecting investment. It remains difficult to predict the course of the recession but we are planning for a recovery in manufacturing to begin during 2010, with growth resuming in 2011.  

The next two years are going to be difficult but also an opportunity. The favourable exchange rate, strong cash position and high levels of predictable income present Delcam with a significant opportunity to increase its market share. During 2009, we plan to maintain our investment in product development and marketing, while continuing to exercise tight control over our day-to-day expenditure to take advantage of the recovery when it comes.  

We remain confident that our strategy will deliver business advantage and believe that Delcam is well placed to see out the near term challenges.

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

Peter Miles 

Chairman

27 March 2009

 

CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2008
	Note	2008 £'000	Restated 2007 £'000
Continuing operations
Revenue	1	32,884	29,707
Cost of sales		(10,101)	(9,946)
Gross profit		22,783	19,761
Administrative expenses		(13,039)	(11,013)
Distribution costs		(7,892)	(7,006)
Other operating income		150	188
Fair value through profit and loss		(372)	(288)
Operating profit		1,630	1,642
Share of results of associates		(34)	3
Finance income		788	638
Finance costs		(125)	(135)
Profit before taxation		2,259	2,148
Taxation		(625)	(401)
Profit for the year	3/4	1,634	1,747
Attributable to:
Equity holders of the parent company		1,634	1,778
Equity minority interest		-	(31)
		1,634	1,747
Earnings per share:
from continuing operations
Basic	2	21.2p	24.6p
Diluted		21.2p	24.6p

 

 

CONSOLIDATED BALANCE SHEET  As at 31 December 2008
		2008	Restated 2007
	Note	£'000	£'000
Non current assets
Goodwill		2,216	2,259
Other intangible assets		2,316	1,944
Property, plant and equipment		7,108	7,186
Interests in associates		756	689
Other investments		26	26
Current assets		12,422	12,104
Inventories		375	421
Trade and other receivables		8,591	7,437
Cash and cash equivalents		8,130	7,717
		17,096	15,575
Total assets		29,518	27,679
Current liabilities
Trade and other payables		(6,105)	(4,991)
Borrowings		(706)	(941)
Deferred income		(2,849)	(2,324)
Current tax liabilities		(265)	(237)
Liabilities held at fair value through profit and loss		(660)	(288)
Non current liabilities		(10,585)	(8,781)
Borrowings		(1,018)	(1,453)
Retirement benefit obligation		(1,075)	-
Deferred income		(73)	(63)
Deferred tax liabilities		(407)	(583)
		(2,573)	(2,099)
Total liabilities		(13,158)	(10,880)
Net assets		16,360	16,799
Equity
Share capital	4	779	779
Share premium	4	8,078	8,074
Investment in own shares	4	(523)	(297)
Revaluation reserve	4	1,455	1,477
Capital reserves	4	9	9
Translation reserve	4	(196)	(83)
Retaining earnings	4	6,758	6,768
Equity attributed to equity holders of the parent	4	16,360	16,727
Minority interests		-	72
Total equity		16,360	16,799

  

CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2008
		2008	2007
		£'000	£'000
Operating activities
Cash flows from operating activities		3,625	2,517
Finance income received		294	220
Finance costs paid		(125)	(135)
Income taxes paid		(517)	(265)
Net cash inflow from operating activities		3,277	2,337
Investing activities
Development costs		(553)	(466)
Acquisition of investment in subsidiary undertakings		(333)	(290)
Purchase of property, plant and equipment		(529)	(1,682)
Payments to acquire investment in own shares		(226)	(200)
Net cash used in investing activities		(1,641)	(2,638)
Financing activities
Dividends paid		(411)	(327)
Repayments of borrowings		(1,331)	(1,610)
Increase in restricted cash		694	-
Proceeds from issue of share capital		4	6,253
New finance leases advanced		-	866
Net cash from financing activities		(1,044)	5,182
Increase in cash and cash equivalents		592	4,881
Cash and cash equivalents at 1 January		6,906	1,904
Effect of foreign exchange rate changes		632	121
Cash and cash equivalents at 31 December		8,130	6,906
Analysis of cash and cash equivalents:
Cash and cash equivalents		8,130	7,717
Bank overdraft		-	(811)
Cash and cash equivalents		8,130	6,906

  

Reconciliation of operating profit to operating cash flows:
	2008 £'000	Restated 2007 £'000
Operating profit	1,630	1,642
Depreciation	704	687
Amortisation of intangible assets	181	165
Release of government grants	-	(8)
Share based payments	106	45
Loss on sale of property, plant and equipment	39	18
Fair value through profit and loss	372	288
Operating cash flow before working capital movements	3,032	2,837
Decrease/(increase) in inventories	46	(211)
(Increase)/ decrease in trade and other receivables	(1,090)	(674)
Increase in trade and other payables	1,749	1,161
Cash generated by operations	3,737	3,113
Additional pension contributions	(112)	(596)
Cash flows from operating activities	3,625	2,517

  

NOTES

For the year ended 31 December 2008

1.    SEGMENTAL ANALYSIS

For management purposes, the Group is currently organised into four geographical operations and management consider the geographical segments to be its primary segmental information. 

Geographical Segment

	2008					2007
Continuing operations	Revenue £'000	Profit/(loss) £'000		Margin %		Revenue £'000		Profit/(loss) £'000		Margin %
Europe	17,945	1,750		10%		14,789		1,677		11%
Americas	8,249	(9)		-		7,887		(63)		(1%)
Far East	6,049	(111)		(2%)		5,708		92		2%
Rest of world	641	-		-		1,323		(64)		(5%)
	32,884	1,630		5%		29,707		1,642		6%
Share of associates results		(34)						3
Net finance costs		663						503
Taxation		(625)						(401)
Profit after tax		1,634						1,747
	2008				2007
	Assets	Liabilities	Net		Assets		Liabilities		Net
	£'000	£'000	£'000		£'000		£'000		£'000
Europe	23,289	(7,452)	15,837		20,632		(6,291)		14,341
Americas	3,315	(3,299)	16		2,595		(2,576)		19
Far East	2,914	(2,407)	507		4,246		(1,955)		2,291
Rest of world	-	-	-		206		(58)		148
	29,518	(13,158)	16,360		27,679		(10,880)		16,799

	2008		2007
	Capital expenditure £'000	Depreciation / amortisation £'000	Capital expenditure £'000	Depreciation/ amortisation £'000
Europe	864	717	1,485	721
Americas	76	51	40	40
Far East	139	94	531	79
Rest of the World	3	23	92	12
	1,082	885	2,148	852

2.    EARNINGS PER ORDINARY SHARE

Basic earnings per Ordinary share is calculated on profit after taxation and minority interests of £1,634,000 (2007: £1,778,000) and on a weighted average number of shares of 7,715,167 (2007: 7,222,428) Ordinary shares of 10p each. The 'C' Ordinary shares do not form part of this calculation.

Diluted earnings per share which take into consideration the dilutive effect of earnings per share if the outstanding share options were exercised, are calculated on the profit attributable to ordinary shareholders of £1,634,000 (2007: £1,778,000) and on a weighted average number of dilutive shares of 7,715,167 (2007: 7,222,428). 

3.    TAXATION  

The taxation charge is based on the effective tax rate of 28% for the full year for the Group.

4.    STATEMENT OF CHANGES IN EQUITY

	Share capital account £'000	Share premium account £'000	Invest- ment in own shares £'000	Capital reserves £'000	Reval -  uation reserve £'000	Trans- lation  reserve £'000	Retained earnings £'000	Total £'000
At 1 January 2008	779	8,074	(297)	9	1,477	(83)	6,768	16,727
Profit for the year	-	-	-	-	-	-	1,634	1,634
Dividends paid	-	-	-	-	-	-	(411)	(411)
Exchange rate difference	-	-	-	-	-	(113)	-	(113)
Actuarial gains and losses	-	-	-	-	-	-	(3,426)	(3,426)
De-recognition of pension surplus	-	-	-	-	-	-	1,745	1,745
Deferred tax	-	-	-	-	10	-	310	320
Transfers	-	-	-	-	(32)	-	32	-
Investment in own shares	-	-	(226)	-	-	-	-	(226)
Share based payments	-	-	-	-	-	-	106	106
New share issue	-	4	-	-	-	-	-	4
At 31 December 2008	779	8,078	(523)	9	1,455	(196)	6,758	16,360

5.    This statement is not being posted to shareholders. The Report & Accounts will be posted to shareholders on 9 April 2009. Copies of this announcement and further copies of the Report & Accounts will be available from the Group's Registered Office: Small Heath Business Park, Birmingham, B10 OHJ and from the Group's website at www.delcam.com.

6.    The Annual General Meeting will be held at Delcam PLC, Small Heath Business Park, Birmingham, on 6 May 2009 at 3pm.

7.    This preliminary statement, which has been agreed with the auditors, was approved by the Board on 26 March 2009. The financial information set out above does not comprise the Group's full statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts will be sent to shareholders as noted above. 

8.    The figures for the year to 31 December 2007 have been extracted from the statutory financial statements for that year, which have been filed with the Registrar of Companies and carry an unqualified audit report. No statement was required under Section 237(2) or (3) of the Companies Act 1985.  

ENDFR EAPDKASANEFE