Delcam, developer and supplier of software to the manufacturing and engineering sectors, shrugged aside the effects of poor US exchange rates to report record revenues for the six months to 30 June. Around 50% of all sales are recognised in dollars, but while the dollar-sterling exchange rate weakened 11% during the period, first half revenues grew 5% to £10.3m. Pre-tax profits raced up 31% to £660,000, a result achieved in spite of a near £2.9m investment in research and development and the launch of several product upgrades. Management maintains that the outlook for H2 remains promising and, with analysts forecasting a £1.6m profit before tax and goodwill for the full year and 22.5p of earnings on sales of £21.7m, the company's current £13.7m market valuation appears rather miserly. The main reason for this - and the only blot on Delcam's copybook - is a fairly substantial pension shortfall, which will be partially resolved by a £1m injection into the fund in September. Annual costs are then expected to rise by £200,000 as management looks to shield itself against further problems. This is likely to drag the company down short term, yet it is worth noting that operationally Delcam remains a strong performer, yielding a 2% yearly dividend and trading off a prospective p/e of only ten. Buy and hold for the long term.