Delcam

Delcam, the international seller of CAD/CAM software to the engineering, aerospace and healthcare sectors among others, is a cash-generative small-cap seeing recovery in its markets.

Interims to June from Birmingham-based Delcam, steered by amiable-but-ambitious management duo Clive Martell, managing director and Kulwant Singh, finance director, revealed a pre-tax profits surge from £300,000 to £1.1m on sales up 12% to £18.1m. The half-year dividend was maintained at 1.35p, underpinned by a 12% net cash increase to £6.5m.

Record half-year turnover was driven by an improvement in software licence sales, with recovery experienced across all major markets, particularly Asia and South America, where licence sales grew by 48% and 50% respectively and including North America and Europe, the group’s largest markets. Highly predictable, recurring maintenance revenues represented £6.3m or 35% of the top line total.

Delcam, which is actually the world’s largest ‘CAM-centric’ software seller, looks well positioned to benefit from growth in the manufacturing sectors of Latin America and the Far East, as well as the medical, dental and orthopaedic sectors across Europe and North America.

As such, full year forecasts from Anne Margaret Crow of house broker WH Ireland suggest growth in pre-tax profits to £1.9m (2009: £1.21m), as sales grow from £31.8m to £35m, with progression in earnings and dividends to 20p and 5.5p pencilled in respectively.

On these estimates, the shares, recommended by Growth Company Investor at 417.5p in 2007, are trading on a prospective p/e of 15, which looks good value given the group’s global growth scope and the fact half-year net cash accounts for 30% of the current market cap. Buy/hold.