Chip designer ARM Holdings (ARM) reported another solid set of results and expects sales in the full year to be "at least in line with market expectations", possibly better. Second-quarter revenues beat consensus expectations by 4 per cent as the company shipped 2.4bn ARM-based chips, up 20 per cent year-on-year.
Sure, a £41.8m charge relating to the settlement of patent-related litigation put a dent in ARM's reported profits. But the group's underlying business actually saw EPS growth of 47 per cent in the first half, as ARM's processor royalty revenues outperformed the semiconductor industry handily, growing at 24 per cent in the send quarter versus the industry average of 2 per cent. This stellar performance reflects ARM's exposure to high-growth subsectors such as tablets and mobile. What's more, ARM's royalty rate per chip continued to track higher - now at 5.0¢, up from 4.8¢ over the past 12 months - driven by the strong uptake of its higher value Cortex-A and Mali graphics chips.
Admittedly, ARM is facing increased competition from rival chip designers as the market for smartphones matures. But the company is quickly building market share in other addressable markets such as smart TVs, tablets and healthcare technologies such that mobile devices now only account for about 50 per cent of group-wide business.
Broker UBS forecasts full-year adjusted EPS of 21.4p a share (from 14.9p in 2012).
ARM HOLDINGS (ARM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 945p | MARKET VALUE: | £13.2bn | |
| TOUCH: | 944-945p | 12-MONTH HIGH: | 1,111p | LOW: 478p |
| DIVIDEND YIELD: | 0.5% | PE RATIO: | 89 | |
| NET ASSET VALUE: | 93p* | NET CASH: | £620m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 268 | 106 | 5.60 | 1.67 |
| 2013 | 342 | 82 | 4.50 | 2.10 |
| % change | +28 | -23 | -20 | +26 |
Ex-div: 4 Sep Payment: 4 Oct *Includes intangible assets of £625m, or 45p a share | ||||
