Prepare for the worst ahead of Imagination Technologies' (IMG) results for the six months to 31 October, due Tuesday. The microchip designer has been battered by sluggish demand for high-end devices and the withdrawal of customers from the hardware industry.
Liberum analysts forecast lower revenues and an 84 per cent drop in operating profit to £2m, largely due to a surge in operational spending from £70m in 2011-12 to £137m in the current year. Shareholders will want to see the group's hefty investments in graphics, audio and processing technology starting to generate licensing and royalty growth. They're also hungry for news on Pure, the consumer electronics business that has lost money for the past seven years.
Imagination recently launched two new products, a MIPS processor core and PowerVR7. These should boost second-half licensing revenues, helping the group stick to the targets it reiterated in September: to grow full-year licensing revenues by 10 per cent and reduce underlying operating costs by 10 per cent.
Broker Liberum expects Imagination to earn 92 per cent of its profits in the second half. It forecasts full-year EPS of 6.5p, rising to 8.4p in 2015-16.
