News Column

Imagination Technologies Swings To Loss But Confident In Progress

June 24, 2014

Hana Stewart-Smith

LONDON (Alliance News) - Imagination Technologies PLC Tuesday expressed confidence that it is on track to deliver progress, after it swung into a pretax loss for the year to end-April, due to higher costs following its acquisition of MIPS Technology Inc in February 2013.

The technology company does not pay a dividend.

The company swung to a pretax loss of GBP314,000 in the recent financial year from a pretax profit of GBP12.2 million the year before, despite seeing revenue rise to GBP170.8 million from GBP151.5 million, hit by a sharp up-tick in research and development costs and sales and administrative expenses following the company's acquisition of MIPS.

Imagination Technologies said that its integration of MIPS had progressed well, and it had made a positive financial contribution to the group.

Licensing revenues rose to GBP38.3 million from GBP29.1 million, boosted by the MIPS acquisition and growth in Imagination Technologies' Enigma communications intellectual property. The company signed licensing agreement and deal extensions with over 50 customers during the year.

Royalty revenues rose to GBP109.0 million from GBP95.1 million, although they were damped by the strengthening of sterling.

Imagination Technologies said that due to the slump in the high-end smart-phone market, and competition in lower-end mobile products, its chip shipments with partners decreased 1% to 530 million from 535 million. Partner shipments including MIPS were 729 million units during the year.

The average royalty rate per chip, excluding MIPS, was maintained at levels in line with the previous year.

The company's Pure audio business continued to be hampered by a difficult trading environment in the UK, Imagination said, leading to a drop in revenue to GBP23.2 million from GBP25.8 million. Imagination Technologies restructured the business during the year to reduce its costs and increase its focus on critical projects.

Gross margin improved to 88% from 86%, benefiting from growth in the company's higher margin Technology business.

The company expects a good performance from its licensing division during 2014 as demand for its video and graphics technologies remains strong. It expects to see shipment volumes increase during fiscal 2015, with growth predominantly in the second half of the year.

The company noted that MIPS volume could be subject to fluctuations, and expects shipments of MIPS to be broadly flat in fiscal 2015. Non-MIPS shipment volumes will be driven by continued growth of existing customers' designs, Imagination Technologies said, and new design wins in the lower-end smartphone markets.

Imagination Technologies reiterated confidence in its goal to have an ultimate share of the smartphone graphics market of around 40% to 60%.

Growing trends in home connectivity and the "internet-of-things" will provide opportunities for the company's MIPS and Ensigma products, and it expects newer technologies to make growing contributions in fiscal 2015.

Imagination Technologies said that it expects growth in underlying operating expenses to be significantly lower than previous years in fiscal 2015 at around 10%.

"Whilst there will continue to be fluctuations and changes in the markets in which we operate, we are confident that our comprehensive and complementary IP families, and the solution-centric IP platforms they are enabling, will allow us to take advantage of the numerous growth opportunities ahead," said Chief Executive Hossein Yassaie in a statement.

Shares in Imagination Technologies were trading up 6.2% at 247.90 pence Tuesday morning.

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Source: Alliance News

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