Chip designer Imagination Technologies (IMG) reported a solid half-year performance. The boom in smartphone sales helped the number of shipped chip units reach 237m, up from 123m, and the group is also on target to reach 500m for the full year.
Higher volumes are also boosting royalty revenue, which jumped 66 per cent in the period to £39.1m. That volume surge, however, is increasingly being driven by the lower end of the smartphone market, where margins are thinner and the average royalty rate dropped from 31¢ (19.4p) a chip unit to 26¢. Licensing revenue also fell - by £19m, to £17.8m - but chief executive Hossein Yassaie still expects 10 per cent year-on-year licensing growth. However, operating expenses rose 38 per cent to £50.2m to accommodate new customers.
The group does faces various sentiment issues. In September, for example, one of Imagination's biggest royalty sources - Texas Instruments - said it was exiting the smartphone market. "The net impact will not be significant," insists Mr Yassaie, arguing that other partners can be found to make up any shortfall. While the ongoing tussle with semiconductor group CEVA to buy US-based group MIPS also adds uncertainty. MIPS would strengthen Imagination's position in the central processing unit market for smartphones, but the $90m bid from CEVA has trumped Imagination's current $80m offer.
Broker UBS expects adjusted full-year EPS of 10.83p (from 7.27p for 2012).
IMAGINATION TECHNOLOGIES (IMG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 430p | MARKET VALUE: | £1.12bn | |
| TOUCH: | 430-431p | 12-MONTH HIGH: | 734p | LOW: 398p |
| DIVIDEND YIELD: | nil | PE RATIO: | 54 | |
| NET ASSET VALUE: | 69p* | NET CASH: | £49m | |
| Half-year to 31 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 56.3 | 10.4 | 3.00 | nil |
| 2012 | 71.4 | 10.5 | 3.00 | nil |
| % change | +27 | +1 | - | - |
*Includes intangible assets of £43.9m, or 17p a share | ||||
