Profiled at 417.5p in May’s Growth Company Investor, this global supplier of CADCAM software for the manufacturing industry remains in robust shape. Interims to 30 June revealed record half-year sales, which increased nearly 10% to £14.5m, reflecting the benefits of two software ranges acquired in 2006 and strong trading across core geographic markets.

However, profitability was affected by the ongoing deterioration of the US dollar with Delcam, which derives over half of its sales in US dollars, suffering a negative £350,000 currency translation hit. Even so, profits were very respectable at £1.26m and the dividend was increased to 1.25p (1.2p), no doubt backed by Delcam’s £1.4m net cash inflow from operations in the first half.

Significantly, Delcam closed the half flush with £4.5m net cash, its balance sheet fortified by a £6.1m investment in the business by FTSE 250 metrology and inspection business Renishaw in April. Ongoing heavy investment in research and development and the acquisition of new software ranges, which can be sold through Delcam’s global distribution network, underpin future growth prospects. However, greenback weakness will continue to depress profits and house broker Brewin Dolphin has downgraded forecasts accordingly.

For December 2007, investors can expect a fall in normalised pre-tax profits to a predicted £2.7m (£2.8m), from sales lifted to £29.5m (£26.7m), ahead of an expected return to profits growth to £3m for 2008. Based on prospective earnings of 30.6p and 32.2p, Delcam trades on modest forward multiples of 12.8 and 12.2. Given its growth prospects and track record, solid cash generation characteristics and yield appeal, the fall in the price presents an opportunity to top up holdings.