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For Imagination, strong results are bittersweet

The hardware group's ongoing dispute with Apple has overshadowed a return to profitability
July 5, 2017

There is something bittersweet about full-year results from Imagination Technologies (IMG). In the year to April 2017 the specialist microchip designer swung back into a pre-tax profit position and decreased its net debt. And yet the future of the company has never been more uncertain, following Apple's decision to stop using Imagination's chips in future versions of the iPhone.

IC TIP: Hold at 154p

The group's major restructuring plan - undertaken after a dismal performance in the 2016 financial year - is complete. It helped extract £27.5m of costs in the period. Imagination also successfully sold or closed all of its non-core, cash-consuming businesses. Excluding these divisions, adjusted operating profit increased from £10.5m to £29.2m. Continuing operations also generated £24.7m of cash, more than offsetting the £13.7m cash outflow from discontinued businesses.

But the group remains in a net loss position following an £18.5m tax charge. This unusually high rate is a side-effect of the group's ongoing dispute with Apple - Imagination has had to write off deferred tax assets, which can no longer be recognised due to uncertainty surrounding future profits.

IMAGINATION TECHNOLOGIES (IMG)

ORD PRICE:154pMARKET VALUE:£438m
TOUCH:154-155p12-MONTH HIGH / LOW:298p76p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:42p*NET DEBT:24%

Year to 30 AprTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201315112.22.4nil
2014171-0.30.3nil
20151572.2-4.9nil
2016122-29.4-29.8nil
20171452.4-10.1nil
% change+19---

Ex-div: na

Payment: na

*Includes intangible assets of £87m, or 31p a share