Delcam - battling on in difficult conditions

(By Philip Carnelley, 28 Aug 09, 09:45) Delcam, the CAM (computer-aided manufacturing) software specialist says it faced “very challenging market conditions” in the first half of the year, with much of its customer base (manufacturers) deferring buying decisions. Sales were down 5% to £16.1m, due to software license sales falling 21%, to £6.9m. Operating profit dropped from £1.3m to just £266k.On a brighter note, recurring revenues for maintenance rose 13% to £5.8m and services were up 21%, to £2.8m.

A notable aspect of the figures is that despite its falling profitability, Delcam increased R&D spend slightly, aiming to gain “strategic advantage” and take market share - seeing market conditions as opportunity not just a problem. Its R&D spend was £4.7m – 29% of turnover, high for a mature software company. By comparison, Aveva, the (rather larger) engineering software company spent 16% of turnover on R&D last year. Delcam has in recent years diversified its customer base into newer market areas – dental, medical and footwear – a decision which is paying off, as these markets are doing better than its traditional manufacturing base. It also noted that sales in India and China continue to rise. The company has predicted an increase in profitability in the second half and that it expects to outperform its competitors due to the spread of its business. Its shares are up 5% this morning on these results.