11th Feb 2015 11:15
LONDON (Alliance News) - ARM Holdings PLC is the top gainer in the FTSE 100 Wednesday, after it posted a rise in profit for 2014, boosted by strong licence revenue growth and improved royalty revenue growth in its fourth quarter, and said it expects to meet market expectations for dollar revenues in 2015.
According to analyst expectations provided by the company, ARM is expected to post USD1.47 billion in revenue for 2015.
ARM expects both its licence and royalty revenue to meet market expectations in the current year. It expects its dollar revenues in its first quarter to be up 10% compared to the previous year, based on improving royalty revenue growth.
The chip designer proposed a final dividend of 4.5 pence per share, taking its total dividend for the year to 7.02 pence, up from a total dividend of 5.7 pence a year before.
ARM posted a pretax profit of GBP316.5 million for the year, compared to GBP162.6 million a year before, as revenues rose to GBP795.2 million from GBP714.6 million, and exceptional costs did not recur.
Stripping out exceptional costs, restructuring, amortisation, shares of joint ventures, impairments and other costs, ARM post a pretax profit of GBP411.3 million, up from GBP364.0 million and earnings per share of 24.1 pence compared to 20.6 pence.
Analysts had expected ARM to post a pretax profit of GBP405.7 million, with earnings per share of 23.5 pence.
Results were boosted by revenue growth of 19% in the company's fourth quarter, including 16% growth in its royalty revenue, helping to reverse a slowdown in royalty revenues in previous quarters and bringing its overall growth in royalty revenues for the year to 1%.
This growth helped to offset a jump in operating costs to GBP100.4 million in the fourth quarter compared to GBP86.8 million in the third quarter as the company increased its investment in research and development, and as a result of the stronger dollar on the translation of costs into sterling. It expects to see operating expenses of between GBP98 million to GBP100 million in the first quarter of 2015 as it continues investment.
ARM said it expects licence revenue growth in 2015 to be consistent with its medium-term guidance. With royalty revenues improving in the second half of the year, and original equipment manufacturers introducing products based on its ARMv8-A processors this year, its outlook for royalties in 2015 is "encouraging", it said.
"In Q4 and throughout 2014, ARM has seen strong licence revenue growth, driven by market-leading semiconductor companies increasing their commitment to use ARM technology, and a broadening range of new customers choosing ARM technology for the first time," said Chief Executive Officer Simon Segars in a statement.
"2015 will bring exciting opportunities and challenges as ARM invests in new products and technologies, and continues to establish itself in competitive new markets," Segars added.
Liberum reiterated its Sell rating in the company despite the positive results, arguing against the suggestion that ARM can supplement the slow down in its core smartphone market by expanding into new markets.
ARM said it saw strong unit growth in high-volume markets including microcontrollers, smartcards and sensors in its fourth quarter, which contributed to its average royalty revenue per chip to 4.3 cents from 4.5 cents a year ago.
Liberum argues that, even if ARM were to take 100% market share in all available markets, smartphones, automotive, the internet of things and networking, it is still over valued.
Shares in ARM are trading up 4.0% at 1,098.64 pence Wednesday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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