Design software group Delcam revealed yet another impressive half-year performance – it has now set new revenue records for five consecutive six-month periods, and profit margins are rising fast, too. Still, there are some signs that conditions going forward may get tougher, leaving the shares – which have soared in the past year – rated up with events.
Unlike many software houses, Birmingham-based Delcam sticks with a business model of selling perpetual licences often and on low margins. Then it keeps more than 35,000 customers loyal by rolling out two to three enhancements a year linked to maintenance income. And that's delivering results – during the period, Delcam increased both sales of new software licences and the take-up of software maintenance contracts. Moreover, the group is making progress in new markets such as the dental sector, as well as in established markets such as automotive and aerospace. Although it's not all good news – Germany is a major market for Delcam and management admits there are signs of some easing of demand there, possibly linked to lower Chinese orders.
Broker WH Ireland expects full-year adjusted pre-tax profit of £4.3m, giving EPS of 50.9p (from £3.67m and 38.6p in 2011).
DELCAM (DLC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 815p | MARKET VALUE: | £64.7m | |
| TOUCH: | 800-830p | 12-MONTH HIGH: | 815p | LOW: 415p |
| DIVIDEND YIELD: | 1.0% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 209p* | NET CASH: | £12.5m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 20.0 | 1.25 | 14.8 | 1.75 |
| 2012 | 22.9 | 2.09 | 26.2 | 2.50 |
| % change | +15 | +67 | +77 | +43 |
Ex-div: 5 Sep Payment: 14 Sep *Includes intangible assets of £3.24m, or 41p a share Aim: Software & computer services | ||||
