Software company Delcam has announced that it is recommending a cash offer of £20.75 per share from Autodesk for the company. That suggests an exit p/e of over 33 based on current year earnings forecasts which is surely enough to gain shareholder acceptance (they already have commitments to vote in favour from over 45% of shareholders). It rather demonstrates the high valuations currently placed on growing and profitable technology companies.
ShareSoc first covered this company in our May 2011 newsletter when the share price was £4.45, i.e. it’s gone up by almost five times in two years. Our note on the Annual General Meeting that year contained the unusual report that one shareholder had questioned whether the CEO was paid enough. There was some increase subsequently which perhaps is an example of the board listening to shareholders. But it reinforces the known fact that the returns from investing in companies where the directors appear to be underpaid are usually better than those where the pay is above the norm.
Another peculiar aspect of Delcam has been an Annual Report that consistently seemed stuck in the 1960s in terms of design and layout, i.e. it looked almost “home-made”. So the old saying of “don’t judge a book by its cover” might be appropriate to companies also.
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