Delcam

Cash-generative 'CADCAM’ software developer Delcam has delighted with news of better-than-expected trading during the first quarter to March.

In its latest trading missive, the Birmingham-headquartered technology group, whose software solutions aid product development and manufacture, said global software sales, particularly in Europe, were ahead of management expectations during the quarter. Maintenance revenues, which spoke for a third of the group’s revenues in 2009, have also been robust ‘on a worldwide basis’.

As a result of both these factors, Delcam now expects to beat previous forecasts in the market for calendar 2010 – house broker WH Ireland was already looking for sales improvement from £31.8m to £33.5m and growth in pre-tax profits to £1.7m (2009: £1.2m). On the strength of the statement, the broker has upgraded these numbers to £33.8m of revenue and £1.9m pre-tax, giving earnings of 20p and a likely 5.5p dividend, progressed from last year’s 5.25p payout - its price target has been upgraded from 230p to 265p.

Though the Delcam board concedes it is difficult to predict the pace of continuing recovery ‘with any certainty’, it remains upbeat about long-term prospects, with analysts expecting spend on CADCAM products from manufacturers to now rebound. Delcam’s robust balance sheet underpins such confidence, with some £5.7m cash, equivalent to roughly a third of the current market cap, sitting in the coffers at its December year-end.

Delcam shares, though first backed at a far higher 417.5p by Growth Company Investor in 2007, are modestly priced, offer a decent yield and are not to be sold at these lowly levels. So sit tight.