Chip designer Imagination Technologies (IMG) has been investing substantially in the business to drive long-term growth. This included the first phase of a planned redevelopment of the company's property facilities, as well as the $100m (£65m) acquisition of MIPS Technologies, a leading provider of central processing unit (CPU) chips. However, a £24m hike in higher research and development spend resulted in a 6 per cent fall in underlying pre-tax profits.
The continuing boom in smartphone and tablet sales meant that the number of shipped chip units climbed 65 per cent to 535m last year, up smartly from 325m the year before. Royalty revenues consequently increased 49 per cent year-on-year to £95.1m - an impressive figure, but one which was hampered by lower average royalty rates due to strong growth in lower-end smartphones. Licensing revenues fell by over £5m to £29.1m, but chief financial officer Richard Smith says this is more of a timing issue than a fundamental one.
Imagination expects to ship 650m of its own chips this year along with 700m MIPS chips (where the average royalty rate is much lower, around 5¢ a chip versus 26¢ a chip in graphics). The main question will be how royalty rates fare in the coming years.
Based on a current year revenue estimate of £208m, analysts at Peel Hunt forecast underlying pre-tax profit of £44.1m and EPS of 12.6p (from £34.3m and 9.4p in 2013).
IMAGINATION TECHNOLOGIES (IMG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 309p | MARKET VALUE: | £821m | |
| TOUCH: | 307-309p | 12-MONTH HIGH: | 645p | LOW: 282p |
| DIVIDEND YIELD: | nil | PE RATIO: | 129 | |
| NET ASSET VALUE: | 72p* | NET CASH: | £45.6m | |
| Year to 30 Apr | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 64 | 2.7 | 3.70 | nil |
| 2010 | 81 | 10.2 | 6.00 | nil |
| 2011 | 98 | 16.4 | 7.70 | nil |
| 2012 | 127 | 28.5 | 8.00 | nil |
| 2013 | 152 | 12.2 | 2.40 | nil |
| % change | +20 | -57 | -70 | - |
*Includes intangible assets of £115m, or 43p a share | ||||
