Delcam Plc Preliminary Report 2001
Preliminary Results for the year ended 31 December 2001

• The results show the effects of strong trading in the first half due to a diversification and expansion of the customer base allied to improved sales overseas. Growth affected in second half due to poor economic conditions in USA and UK. 

• 2001 saw the introduction of new versions of the Group's key software products, which have received positive reactions from our customer base

• Strengthening and additions to the overseas reseller chain bodes well for the future sales.

• Continued investment in R & D and marketing

• Directors confident that investments will increase future results and therefore the Company is marginally increasing the level of dividends for the full year

I am very pleased to report that Delcam’s sales continued to grow during 2001 to £18.2 million compared with £17.0 million during 2000, an increase of 7.3%. After record sales and profits in the first half of the year, performance in the second half showed considerable variation. The rate of growth was affected by the events of 11^th September 2001 and the generally poor economic conditions in the USA and the UK. The Company announced the decline in sales in September and October 2001 with the consequential fall in profitability but although sales significantly improved in November and December, with the latter being a record month for software sales, this was not sufficient to recover the loss of profits from those two critical months.

The Company had already taken the strategic decision to increase its investment in R & D, marketing and people, as further explained below, resulting in a profit before tax for the year of £0.85 million, compared to £1.64 million for 2000. The Company is confident that these investments will increase future sales and therefore the Board is proposing to marginally increase the level of dividends for the full year. Basic earnings per share were 9.9p compared with 20.2p last year.

The Board proposes to pay a final dividend of 2.4p per ordinary share (2000 – 2.4p), making the dividend for the full year 3.35p per share (2000 – 3.25p per share). It will be paid on 9 May 2002 to shareholders on the Register as at 5 April 2002.  The shares are expected to be quoted ex dividend on 3 April 2002.

Delcam has maintained its progress as the leading international supplier of complete, automated CADCAM systems for the design, manufacture and inspection of complex shapes.  We have increased our investment in product development, marketing and sales network. Total spending on R & D over the year increased by over £300,000, enabling the release of new and improved software throughout the year. Marketing expenditure was increased by £350,000. The increased activity included participation in more than 60 exhibitions world-wide. This continued high level of investment, while affecting our short-term profitability, is essential for achieving our longer-term sales and profit goals.

Our Sales Partners continued to strengthen and grow, with over 80 additional sales and support staff recruited in the year to help increase our sales and to provide additional support to our customers. 

Products

Our investment in product development has allowed us to release significant new versions of all of our software during the year. Major upgrades were released of our key products - the design software PowerSHAPE and our machining software PowerMILL. In addition to enhancements to the core software, new PowerSHAPE modules were released for advanced product design, and for electrode and injection mould design. Developments in PowerMILL have reinforced Delcam’s leading position in more demanding machining operations, such as high-speed machining and five-axis machining, as well as improving our competitiveness in the mainstream three-axis machining area. The markets for our PowerINSPECT inspection software and the CopyCAD reverse engineering system have continued to grow, both by increasing their functionality and by expanding the range of equipment with which they can be used. Our ArtCAM software for engraving and routing has also seen strong growth, particularly in the jewellery industry and in the North American signmaking industry.

A new product, PS-Team, for project and team management, has been introduced and early response has been encouraging. This new software is a web-based on-line collaboration product suitable for a wider range of customers than those using our CADCAM software.

The organisational changes we have made to manage our European subsidiaries in UK, Italy, France and Germany, as a separate division, have been very successful.  German sales increased by 43%, Italian sales increased  by 20% and French sales increased by 42%.  Recruitment continued in both France and Germany, to staff the additional offices opened in both countries during the second half of the year. UK software sales remained steady despite the problems being experienced by manufacturing industry but there was some reduction in UK service income.

The acquisition of the Alcami jewellery service bureau during the year has added an additional revenue stream and has contributed to the growth of our software sales to the jewellery industry.

Rest of Europe

Better results were seen in all the other countries in which we operate, with the exception of Denmark.  The continuing recovery in Russia helped to generate a strong growth in software sales. Significant improvements in software sales also occurred in Austria, up 89%, the Czech Republic, up 47%, and Sweden, up 26%.

The Americas

The expansion of our Sales Partner network has continued in North America, the world’s largest market for CADCAM software.  We increased our expenditure in the region by over £200,000, with more extensive marketing and improved technical support for our customers. Trading conditions have been extremely difficult as a result of the economic slowdown and the events of 11th September. These problems have temporarily restricted our software sales growth to 2.7%.  However, this should be considered a very satisfactory performance, as we believe that many of our competitors have seen a decline in their sales. 

South America was adversely affected by the economic problems in the USA throughout 2001, although there were some signs of improvement towards the end of the year. Software sales in Brazil saw a small increase, while both Mexico and Argentina experienced a significant decline.

Software sales in both Japan and Korea, the two largest markets in this region, have seen only modest growth from 2000. Software sales in Taiwan recovered well in the second half of the year, while those in Hong Kong more than doubled over the previous year. The Indian branch office continued the excellent sales shown in the first half of the year. A new division of the branch offering CADCAM services was established towards the end of the year.

The Board believes that as a result of our increased investments in product development and marketing last year, we start 2002 in a strong competitive position.  Whilst the outlook in many of our markets remains uncertain, the recovery in orders at the end of last year and the level seen at the start of the current year give me confidence that we will see an improved financial result this year. I would like to thank the staff for their hard work and contribution in 2001. 

T R M KINSEY
Chairman
20 March 2002

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