Final Results

19 June 2013

Imagination Technologies Group plc

Strong unit shipments resulting in 49% growth in royalty revenue; organisation strengthened for next stage of growth

Imagination Technologies Group plc (LSE: IMG, "Imagination", "the Group"), a leading multimedia, communications and processor technology company, today announces results for the year to 30 April 2013.

The Group's partners shipped 700m units consisting of 535m (2012: 325m) from Imagination excluding MIPS Technologies, Inc. (MIPS) and 165m from MIPS in the 12 weeks since the business was acquired on 7 February 2013.

Financial highlights

·; Group revenue up 19% to £151.5m (2012: £127.5m) including £8.2m from MIPS*

o Technology revenue increased 28% to £125.7m (2012: £98.2m)

- Royalty revenue up 49% to £95.1m (2012: £63.8m) including £5.6m from MIPS*

- Licensing revenue of £29.1m (2012: £34.4m) including £2.6m from MIPS*

o Pure revenues of £25.8m (2012: £29.3m)

·; Adjusted pre-tax profit** of £34.3m (2012: £36.8m)

·; Reported pre-tax profit of £12.2m (2012: £28.5m)

·; Adjusted earnings per share** 9.4p (2012: 10.1p restated***)

·; Reported earnings per share 2.4p (2012: 8.0p restated***)

·; Net cash balance of £45.6m (2012: £60.7m)

o Net cash included £56.3m held to settle MIPS patent sale tax liability - paid on 14 June 2013

* Reflects revenues from 7 February 2013 to 30 April 2013

** The reconciliation from reported results to adjusted results is set out in Note 3.

*** See note 6.

Business highlights

Technology business

Royalties and design wins

·; Partner chips shipped 535m units, excluding MIPS (2012: 325m), up 65% - saw substantial growth in H2 to 298m units (H2 2012: 202m)

·; Mobile phone and tablet markets grew very significantly, TV/STB rapidly accelerating with other segments showing steady growth

·; Momentum maintained in chip design win growth with 158 active partner chips (2012: 136); 84 in production (2012: 60)

·; Average royalty rate (excluding MIPS) maintained in H2 despite significant volume ramp-up and strong lower-end handset demand, as high end devices market continues to show good growth

·; Next generation graphics products - Series6 ('Rogue') - now shipping

Licensing

·; As announced in our trading update on 2 May 2013 licensing was influenced by transitory market changes and regional consolidations impacting on customer base and timing of deal closure

o Many new and extended agreements with existing partners including Allwinner, Greenplug, Intel, LG, MediaTek, Realtek, Renesas, Samsung, ST, ST-Ericsson, TI and Toumaz

o Several new partners added including Entropic, Ineda, Metaio and Socle

·; Over 20 important customer engagements involving around 35 silicon IP (intellectual property) core licenses

o Including graphics, video, vision, broadcast/connectivity and processor silicon IP cores, as well as V.VoIP (video and voice over IP) technologies

·; Continued active pipeline of prospects across all IP families - multimedia, processor, communications and cloud technologies

Acquisition of MIPS

·; Acquisition for $100m in cash - completed on 7 February 2013

·; Accelerates Group's presence in the substantial and growing CPU/processor IP market

·; Expands Imagination's broad range of SoC IP

·; 165m units shipped since deal completed

·; Revenue of £8.2m since 7 February 2013, generating a profit of £1m - synergies exceeding prior expectations

Pure business

·; As previously announced the UK and some export markets continue to be tough in the short-term

·; On-going DAB adoption worldwide and growing demand for connected audio

·; Continued strategic development and pathfinding role

o Focus on development of technologies for digital broadcast, cloud connected devices for home audio streaming and automation

o New Pure wireless streaming products including Jongo family launched

Hossein Yassaie, Chief Executive, commented:

"Last year marked a number of key strategic developments by Imagination. We saw a notable jump in unit shipments and we also implemented a programme of significant investment in technologies, people and infrastructure to support our five year growth programme.

"In particular, the MIPS integration is progressing very well and customer reaction to the acquisition and the technology roadmap has been very positive.

"We have established leading positions in two of the fastest growing global markets - smartphones and tablets. In smartphones we are on course to maintain strong market share, whilst we provide the technology for many of the leading tablets.

"We are also well positioned to address the growing requirement for the existing and emerging categories of devices for home entertainment, digital health, automotive, security and utilities markets whilst meeting their ever-expanding range of communication needs.

"We have started the year well and are on course to see over 650m units (excluding MIPS) shipped in the current financial year - another significant step towards our 1bn unit shipment target in 2016."

Enquiries

About Imagination Technologies

Imagination Technologies - a global leader in multimedia, processor, communication and cloud technologies - creates and licenses market-leading processor solutions including graphics, video, vision, CPU and embedded processing, multi-standard communications, cross-platform V.VoIP and VoLTE, and cloud connectivity. These silicon and software intellectual property (IP) solutions for systems-on-chip (SoC) are complemented by an extensive portfolio of software, tools and ecosystems. Target markets include mobile phone, connected home consumer, mobile and tablet computing, in-car electronics, networking, telecoms, health, smart energy and connected sensors. Imagination's licensees include many of the world's leading semiconductor manufacturers, network operators and OEM/ODMs. Corporate headquarters are located in the United Kingdom, with sales and R&D offices worldwide. See: www.imgtec.com.

Strategic overview

The Group made very good progress during the year as well as making a key strategic acquisition and seeing faster growth in unit shipment volumes than expected.

The acquisition of MIPS, completed on 7 February 2013, significantly strengthens Imagination's presence in the substantial and growing processor and CPU IP (central processing unit intellectual property) segment, in both established and new markets. MIPS is one of the small number of CPU architectures directly supported by the Android™ OS.

The Group is already well advanced in combining Imagination's and MIPS' complementary CPU technologies, resources, expertise and market presence. The Group aims to deliver a competitive and comprehensive proposition and create a new industry-leading force in CPU development and licensing within the next five years.

The higher than expected unit volume shipments reported during the year demonstrate the strength and growing diversity of the Group's SoC (system on chip) design wins. These resulted in very strong growth in unit volumes and royalty revenues. Our technologies continue to be in demand with the extensive design wins achieved representing a clear indication of generally broader and deeper engagements both across customers and the Group's IP families.

A key element of our strategy is to invest for the long term in our people, technologies and infrastructure ensuring that the business will continue to scale and grow strongly. We have aspirations to grow well beyond our stated 1bn unit target creating significant value for all our stakeholders. Our plans and activities are designed with that as a key objective. Investments in technology in order to maintain our leading position and take advantage of industry/market evolution require commitment of resources many years ahead of the potential revenue growth. This year we have also significantly invested in people and infrastructure to deliver the required scale effectively and on a timely basis for our medium and long-term development.

We completed the first phase in the planned redevelopment of our property facilities in Kings Langley. The overall project is expected to complete in 2015 and will consist of three office buildings to house approximately 1,100 employees and a dedicated datacentre. The total project investment is expected to be around £65m of which £35m has now been made.

Imagination operates in markets which continue to develop, evolve and grow very rapidly, driven by the global demand for improving user experiences, multimedia content, internet access and wireless connectivity. Existing and new categories of consumer products and devices supporting these fundamental trends continue to drive much of the global electronics industry.

Following a number of recent acquisitions and extensive investment in R&D, Imagination is now focussed on four main areas - multimedia, processor, communications and cloud technologies. The Group is now in a position to provide a portfolio of solution-centric and highly synergistic IP for a widening range of customers across an increasing range of market segments.

The Group's multimedia capabilities now encompass graphics, video, vision and ray tracing for an ever widening market of consumer and industrial products.

Combining MIPS with Imagination's own processor capabilities enables the Group to provide industry-leading processing capabilities for a range of existing and new verticals in consumer and industrial markets such as mobile multimedia and computing, digital entertainment, networking, storage, Internet of Things, automotive and more.

The Group is now providing a wide range of multi-standard communications IP, driven by the ever increasing demand for wireless connectivity, multi-standard broadcast and the emerging Internet of Things.

The cloud offering, branded Flow Technology constitutes an important enabler that is essential for many of the emerging needs across a diverse range of market segments including next generation home media distribution, home automation, security, healthcare and energy management. Pure's pioneering and driving work in this area is an integral part of the Group's strategy.

Financial Review

Revenue

Group revenue for the period ending 30 April 2013 increased by 19% to £151.5m (2012: £127.5m). This included a £8.2m contribution from MIPS. (All MIPS figures are for the period from 7 February 2013 to 30 April 2013).

Strong growth from royalties increased Technology revenue by 28% to £125.7m (2012: £98.2m).

Royalty revenue increased by 49% to £95.1m (2012: £63.8m). Partners' chip shipments (excluding MIPS) increased by 65% to 535m (2012: 325m) units as a wider and more comprehensive range of OEMs, in addition to established customers, started shipping devices. H2 saw substantial growth to 298m units (H2 2012: 202m). MIPS contributed £5.6m of royalty revenue based on 165m units shipped.

The average royalty rate, excluding MIPS, reduced in line with expectations in the year due to a change in mix with very strong growth in lower-end handset shipments. As forecasted, the second half royalty rate was maintained at a similar level to the first half given the overall mix.

Licensing revenue was £29.1m (2012: £34.4m) of which MIPS contributed £2.6m.

For Pure, the tough environment in the UK and some export markets resulted in revenue of £25.8m (2012: £29.3m). 35% (2012: 36%) of Pure's revenue came from international markets.

Profit and operating expenses

Driven by the strong progress in the very high margin Technology business, Group gross profit, including MIPS, was up 23% to £130.6m (2012: £106.5m), with overall gross margin increasing to 86% (2012: 84%).

Underlying Group operating expenses, excluding MIPS, increased as expected to £91.5m (2012: £69.8m). Group operating expenses including MIPS were £98.3m. The significant increase in operating expenses reflects the strengthening of key parts of the Group, in response to the fast growing customer base and technology development as well as the inclusion of the newly acquired MIPS and Nethra Imaging.

The rate of increase has been a short term feature with the underlying operating expense growth rate expected to reduce to around 18% to 20% in the current financial year. Underlying overheads for MIPS, since 7 February 2013, were £6.8m.

Underlying expenses excluded non-cash share-based incentives charge of £11.3m (2012: £10.3m), amortisation of intangibles £4.2m (2012: £2.7m), a credit on the revaluation of deferred consideration of £nil (2012: £4.0m), a gain on investments of £1.8m (2012: £0.8m) and impairment of investments of £5.7m (2012: £0.1m). The impairment of investments primarily relates to Toumaz (£4.7m). This is a non-cash accounting adjustment reflecting the movement in the share price at year end and does not reflect the Group's view on the value of the investment. The Group believes Toumaz's technologies in healthcare and connectivity are of huge relevance to these key and substantial markets, and anticipates significant long-term value from this investment.

They also exclude the £2.7m (2012: £nil) of acquisition related items relating primarily to the MIPS acquisition.

Adjusted operating profit** for the Technology business was £39.9m (2012: £39.6m) reflecting a combination of very strong increases in royalty revenues offset by the planned investment growth. The adjusted net operating margin for the Technology business was 32% (2012: 40%).

For Pure the difficult trading conditions and increased investment in the new wireless speaker and home automation product ranges resulted in an adjusted operating loss** of £6.4m (2012: loss £2.9m).

Earnings and taxation

The Group's adjusted pre-tax profit** was £34.3m (2012: £36.8m). The reported pre-tax profit was £12.2m (2012: £28.5m).

The net tax charge was £5.9m (2012: £8.1m). The deferred tax asset on the Group balance sheet to be utilised against future UK profits has reduced to £10.4m (2012: £18.8m).

The Group's adjusted earnings per share** was 9.4p (2012: 10.1p restated). The Group's reported earnings per share was 2.4p (2012: 8.0p restated).

Balance sheet

Goodwill at 30 April 2013 was £55.0m (2012: £31.7m). The increase of £23.3m is due to the acquisition of MIPS.

Other intangible assets also increased to £59.6m (2012: £11.5m) largely as a consequence of this acquisition.

The investment balance increased to £18.7m (2012: £13.0m) following investments in 7digital Group, Greenplug, Ineda Systems, Orca Systems, Toumaz and UBC Media.

Property, plant and equipment was £45.9m (2012: £25.0m) reflecting the capital expenditure of £22.1m (2012: £11.5m). The primary element of this is the re-development of the Group's property facilities in Kings Langley. This is the second year of the four year re-development plan.

Trade and other receivables were £64.0m (2012: £41.1m). £10.9m of the increase is due to acquisitions, the rest reflects the growth in the royalty revenue.

Trade and other payables were £35.6m (2012:£26.4m). The majority of the increase relates to the acquisitions (£8.5m). The trade payables outflow in the cash flow statement of £22.3m (2012: £2.0m inflow) primarily relates to payments made relating to pre-acquisition transaction expenses of MIPS in the post-acquisition period.

Corporation tax payable was £56.3m (2012:£nil). The balance represents the tax liability arising from the MIPS transactions pre-acquisition. The majority of the tax liability was settled on 14 June 2013.

Interest bearing loans and borrowings were £31.0m (2012: £5.5m). During the year a $48m term loan was drawn down to partially finance the MIPS acquisition and also to repay the previous mortgage borrowings of £5.5m.

Deferred tax liability was £19.2m (2012: £3.4m). The increase is due to intangibles acquired in MIPS.

The cash balance increased to £76.6m (2012: £66.3m).

Excluding the tax liabilities of £56.3m, at the year end the Group would have had net debt of £10.7m (2012: net cash £60.7m).

The cash flow contained a number of significant items including:

·; £63.9m outflow as consideration for the acquisition of MIPS

·; £82.3m cash acquired as part of the MIPS transaction to settle the tax liability and other transaction related payments.

·; £31.0m inflow from the term loan taken as part of the financing of the MIPS acquisition.

** The reconciliation from reported results to adjusted results is set out in Note 3.

Technology Business

During the last financial year the Technology business continued to make real progress in its three key metrics:-

·; New licensing deals, which generate short-term revenue and also represent a measure for general technology adoption

·; Partner chip volume ramp-up, which drives royalty revenues

·; Growth of SoC design wins, which are indicative of technology deployment and the underlying drivers behind future royalty generation

Licensing

The comments below exclude MIPS unless stated otherwise. The licensing activities led to a number of important licensing agreements or deal extensions involving around 20 customers and around 35 major IP licenses as well as a number of smaller deals and upgrades. As previously explained the revenue from licensing deal closure was behind plan during the second half due to regional issues and certain customers changing course in the short-term.

Among the key agreements, there were significant new licenses or extensions with existing partners, including Allwinner, Greenplug, Intel, LG, MediaTek, Realtek, Renesas, Samsung, ST, ST-Ericsson, TI, Toumaz and continuation of a number of long-term subscription license arrangements with certain key partners as well as new partner license deals with Entropic, Ineda and Socle.

It is appropriate to clarify two areas of partnerships. Firstly we continue to have a strong and on-going partnership with Intel Corp, who are also a significant shareholder. As is normal we cannot provide specific details on various projects but we can confirm that we have many existing and future projects on-going with Intel and expect this partnership to result in growing and significant volume shipment across many markets now and in the future. Also Intel's recent success at Samsung with devices incorporating our technologies is a significant development indicating that the mobile market is opening up to other processor architectures. With respect to TI we expect their transition out of the mobile segment to both take some time and for the partnership to strongly continue in the new areas of focus for TI which we believe will be of significant value to Imagination. Additionally our other partners active in the mobile segment are indeed extending their business to support some of the opportunities TI leaves open as it transitions its business.

The target markets for the deals closed during the year across our partners include mobile phone and tablets/mobile computing with both segments across high, mid and low-end categories, TV/STB, PMP/Camera, in-car navigation/dashboard, home connectivity and automation, digital radio and industrial/enterprise equipment.

·; Multimedia - The key technologies under this category are graphics, ray tracing, video and vision:-

o Graphics - The PowerVR graphics processor (GPU) family continues to lead the market in technological capability, roadmap strength and ecosystem and remains by far the most adopted and shipped technology of its kind. There have been many significant product announcements in mobile phone and tablet segments during the period and we are aware of several other important products from key OEMs that we expect to be launched in the very near future in these and other segments. The Group has continued to see momentum in design wins for its PowerVR graphics technology across Series5/5XT and Series6. The Group's new generation technology, Series6, has once again been acknowledged by many key partners as the market leader and has already secured over 20 committed SoCs. Several of our partners and our own prototype chips reached silicon and have demonstrated very strong characteristics in performance and power. Independent industry reports have confirmed that our technology has significant competitive advantages in these key metrics. We saw the first Series6 based product in the form of the latest LG smart TV and we expect to see several other end-user products using this technology to begin shipping in volume during the current calendar year.

We expect the trends in User Interface (UI) functionality and the relentless advancement in graphics content combined with increased resolution and accuracy of displays to continue to demand ever increasing GPU performance and capabilities.

A further important emerging use case for modern programmable GPUs is GPU compute where the GPU is used as an offload engine in compute intensive applications to achieve more performance with less power consumption than the CPU alone. This approach will increasingly drive many next generation features including gesture recognition, computational photography, image processing and enhancement and new applications that can take advantage of massive computational capabilities of modern GPUs. The Samsung Galaxy S4 using our SGX graphics is one of the first examples that delivers a level of GPU compute capability through industry standard APIs. PowerVR Series6 technology is designed to take the GPU compute capabilities to a new level. We expect this technology to fuel new innovations and demand for GPUs.

PowerVR graphics technology has a very strong and/or growing footprint across both iOS and Android. This is ensuring strong market share in this platform particularly as new partners launch their products.

In TV and STB market areas we are now seeing accelerated progress with smart TV's from LG and Sony starting shipment recently, with others to follow.

o Our complementary ray tracing technology, obtained through the Caustic acquisition, has made good progress. The first stage of deployment and development of the ecosystem was unveiled during last year as we announced Caustic Professional R2100 and R2500 OpenRL acceleration boards, plus Visualizer plugin software using OpenRL for Autodesk® 3ds Max® and Maya®. Ray tracing IP, to work alongside our GPU technology, is in advanced development and will be made available for licensing during the current financial year.

o Video - Our PowerVR video decode and encode processor (VPU) families, which support the latest and emerging formats, continue to see strong volume growth. We are seeing a growing industry trend in favour of licensing rather than internal development, particularly as the next generation of advanced video standards are coming to market. In keeping with our strategy of providing leading-edge and market-driving technologies to our customers, during last year we launched the new PowerVR Series4 video processors offering increased performance and precision as well as supporting the emerging ultra HD resolution displays of 4Kx2K pixels. These technologies are seen as essential for future generations of smart TV products which require very high quality and/or the capability to display full HD at the same time as related information such as social network interactive pages. We are also at an advanced stage with respect to next generation video technologies which are designed to offer further compression and efficiency advantages.

o Camera Vision Processing - Vision processing is needed to get the best image from a camera sensor. This is an area that is important both for market opportunity and technology synergy reasons. Specifically it is clear that the deployment of camera functionality is relevant to many product categories and market segments. Furthermore careful and tight integration of camera vision processing, video encode and GPU cores can be used to achieve very important optimisations. We have been carrying out research and development in this area for some time. We also acquired a small company, Nethra Imaging, during the last year to complement and accelerate our work whilst also strengthening our patent portfolio in this area. We expect first IP product delivery in this area in early 2014.

·; CPU and Processor cores

The Group's capabilities and opportunities in this area have been substantially enhanced with the acquisition of MIPS. The progress of integration of MIPS with the existing in-house processor activities (Meta) has been completed successfully with the combined unit now operating under the MIPS brand. Organisationally we now have a single significantly larger R&D team working in this important area. The sales, marketing and administration functions within MIPS have also been successfully integrated into the relevant functions in Imagination with better than expected synergies. Importantly we started detailed engagements with many key customers shortly after the acquisition. In parallel, taking into account customer and market input, we have been refining and developing a strong and comprehensive roadmap for the future. This step has now completed and we have begun to share final roadmap and future technology plans with many key customers. These include expansion of existing Aptiv range as well as the next generation family of MIPS cores code-named "Warrior" that will be unveiled publicly later this year. The feedback from these engagements has been very positive and encouraging.

Our internal analysis and also feedback from customers, who have used MIPS for many years, clearly point to the competitive strength of this technology with respect to both performance and power consumption per unit area of silicon relative to competition. These advantages are very real and stem from the very well designed and true-RISC nature of the MIPS architecture. The inherent 64-bit support in the original underlying MIPS architecture is an example of the high degree of architectural elegance and future-proof thinking. Additionally the multi-threading capabilities of MIPS, an area of strength for our in-house Meta technology, in conjunction with other similarities, constitute a strong synergy basis for technical integration and leverage.

Overall we consider the CPU and processor market to be a significant and growing space and one where the opportunities are increasingly receptive to our offerings. The more open nature of modern operating systems combined with the significant existing successes of MIPS in several segments offer a very encouraging array of opportunities, which we are aiming to target and build over the next few years.

The feedback from the customer base also suggests that, with the stability and long-term commitment that Imagination brings to MIPS, the opportunity for MIPS to become a real alternative in this market is very real indeed. The industry welcomes the much needed balance that such a viable alternative brings to the environment.

The MIPS family of processors combined with our Ensigma technology offer a highly efficient 'connected processor' which we believe is uniquely well positioned for many connected devices and the emerging Internet of Things and Machine-to-Machine (M2M) applications.

·; Communications

o Connectivity and broadcast - Our Ensigma programmable radio processing unit (RPU) family supporting both multi-standard broadcast receivers and Wi-Fi/Bluetooth connectivity is becoming increasingly relevant to mainstream markets and has been designed into a growing number of chips and products. The design wins for this technology are steadily accelerating making this technology a sizable and growing part of our business. Ensigma RPUs support worldwide TV and radio reception as well as important connectivity standards such as Wi-Fi, all running on the same silicon engine in software. This technology is increasingly essential for delivery of cloud and broadcast content to home and also within the enterprise. Already we have partner devices in volume shipment using this technology for digital radio and Wi-Fi connectivity and we expect several new partner devices targeting multi-standard/global TV markets to begin shipment during 2013.

o V.VoIP - our HelloSoft family of video and voice over IP (V.VoIP) products, including platform agnostic SDKs, constitute an important element in our IP offering with relevance to both the arrival of 4G/Long Term Evolution (LTE) networks which require VoIP over LTE (VoLTE) and general internet-based communication. HelloSoft V.VoIP technology has now been adopted by a number of key network operators and handset manufacturers for both enterprise and consumer segments including MetroPCS and ZTE.

·; Cloud Technologies - Flow

This technology is an emerging one with considerable synergy and significant potential for Imagination. Given our strong silicon IP offerings in the key areas of processing and connectivity, we have been taking steps to ensure these technologies are complemented by relevant software technologies that can enable their easy and quick deployment in the emerging Internet of Things markets. The Flow technology, which has been in development for over two years, has been designed to speed-up the deployment of cloud-managed connected devices in diverse markets including home automation, healthcare monitoring, energy management, security and monitoring, connected/intelligent toys, industrial and agricultural monitoring/control and many more. The technology aims to offer a ready-made ('shrink-wrapped') software platform, running on our silicon IP solutions and covering the server and client ends of such systems. Flow is an application independent software platform that ensures all essential baseline services such as authentication, security, update/maintenance are available to the developers, alongside APIs for functions such as control, streaming, and payment services. The aim has been to enable easy and quick application development without the need to have to worry about underlying capabilities. The Flow technology has been deployed internally and in conjunction with partners in delivering our Pure internet radio and music services. Such services require real-time and reliable management of large numbers of complex connected devices. We expect Flow technology to be a very serious enabler and supporter for the deployment of our various silicon IP cores, in particular processors and connectivity, in the emerging and very large cloud-connected devices market.

·; Strategic technology investments

As part of our overall plans we hold a number of strategic and long-term investments in a small number of private and listed companies. These investments are designed to ensure we are both exposed to and are driving trends that are of importance to our business. These holdings have been achieved through a combination of providing strategic access to Imagination's IP as well as cash investments. Among these investments are Toumaz, UBC Media, Ineda, 7digital, Orca and Greenplug and cover areas including healthcare, Internet of Things, media and content, wearables, connectivity and green power.

Partner chip shipments and royalties

Partner chip unit shipments grew strongly to 535m units (excluding MIPS) (2012: 325m units). The strong shipment in the period was driven by continuing momentum from a number of our customers across several market segments. Specifically last year saw excellent penetration of our technology in the emerging markets as lower-end handset volumes gained momentum. The volume growth has been across the expected key segments, including: mobile phone, computing/tablets, mobile multimedia/gaming and home consumer. We have seen accelerated growth in TV/STB segments during the period. The royalty revenue growth has continued to be strong and as expected, the strong unit volume growth has steadily extended to the lower-end of the smart phone market resulting in a small and expected downward movement in the average royalty rate.

SoC and end-product design wins and pipeline

SoC design wins are the driver for future partner chip shipments and royalty revenue growth. Strong continuing momentum saw new partner SoC design wins (excluding MIPS) increase to 158 (net of obsolescence) (2011: 136). Clearly the design win momentum was maintained despite the fluctuation in licensing revenue. Of these, 84 are shipping or beginning to ship, with the balance still in design. The latter will be the driver for significant further royalty revenue growth.

These committed devices are continuing to diversify across Imagination's partners and key market segments:

·; 48 for mobile phone application processors

·; 8 for handheld multimedia (PMPs, hand-held gaming/entertainment, camera, mobile TV)

·; 39 for Home Consumer Entertainment (TVs, STBs, DVDs, digital radio and audio, connected audio, and home entertainment devices)

·; 25 in mobile computing (tablet/mobile computing)

·; 20 for In-car (navigation, dashboard, personal navigation devices)

·; 18 for other markets covering green energy, networking, healthcare, enterprise, industrial, amusement and toys

With respect to end-user products there have been important launches from several key players in the last few months, particularly in phone, tablet and TV/STB segments. We expect to see further major product launches from other key OEMs, including high profile devices from leading OEMs and for these to span across mobile, tablet and TV/STB segments. There are other notable design wins in China that will further drive our strong position in the tablet market overall.

Our initial assessment suggests that there are 300-400 SoCs in production using MIPS IP.

Pure business

Pure continued to be held back by the general economic pressure on consumer spending. The UK market was very tight during the second half and the international markets were mixed with reasonable performance in Switzerland and Germany and more muted performance in Australia and Scandinavia. We do expect to see significant financial improvement in this business in the medium term driven by new innovative and market driving products and the general economic improvements.

Pure's focus has been and continues to be proactively helping to drive certain important developing and emerging markets that are strategic to our business:

i- Digital radio:- Pure's product line drove the market from the early days and set the much needed agenda to help develop this new market. This continues today in the form of supporting and driving the adoption of digital radio internationally. These include key markets such as Germany, Australia and Switzerland where Pure's activities have been instrumental in the progress made. We now expect some of these markets, including UK, to begin migration towards a switch-over plan whilst others such as Germany to develop further in digital radio penetration. As a result we expect the global markets for digital radio to grow substantially over the next few years with our technology playing a key part and securing a major share.

ii- Wireless home/in-car audio:- As a first step in helping to drive home connectivity and automation, Pure has been focussed on wireless audio streaming across three key application areas; hybrid internet and broadcast radio enabling access to global radio stations and audio content; advanced interactive internet connected services, especially Cloud music delivery, which deploys Imagination's Flow enabling technologies; and the more recent area of audio streaming of content from popular mobile devices to home audio systems and speakers including multi-room capabilities.

iii- Home automation:- A key goal is to ultimately contribute to the emergence and development of the home automation opportunities through the use of Imagination's processing, connectivity and Flow cloud technologies. This is the next area of strategic focus for Pure with technologies and products yet to be announced.

Several key products were launched during the last financial year in line with the above strategic objectives. Ground-breaking Pure wireless streaming products were launched in the Jongo multiroom music system family. Other recent products include the Avalon 300R Connect Freeview+ HD Digital TV recorder with full support for Pure cloud services, second generation Pure Connect iPad app and Pure Connect website (formerly The Lounge) and the Move 400D portable digital radio. Jongo S3 and Avalon have been very well received and both have received prestigious What Hi-Fi? Sound and Vision 5 star awards. In addition a number of strategic initiatives are well underway and these include Pure's direct to consumer initiative with Universal Music UK, aftermarket digital radio adapter supply to the VW group and ongoing engagements supporting the Flow cloud connectivity programme including advanced engagement with Onkyo Corporation.

The Group's investment in developing the Flow technology and associated cloud client and portal technologies, which form the basis of the Pure Connect portal and, in collaboration with ecosystem partners, enable services such as Pure Music, a key and strategic activity that Pure is helping to drive.

Outlook

The full-year saw strong volume ramp-up ahead of our expectations. We see this as a solid half-way milestone to our target of 1bn annual unit shipments (excluding MIPS) by 2016.

We expect to see continued shipment growth from our existing high volume partners. Additionally we expect other partners targeting mobile, tablet and TV / STB markets to ramp up significantly during the current financial year. As a result we expect partner chip shipments in FY14 to continue to grow strongly and to exceed 650m units (excluding MIPS).

We have an active licensing pipeline with strong interests from and engagements with existing and new customers across all of our technologies and have made a promising start to the year. We therefore expect to see solid progress in this area in the current financial year and achieve our previously announced target of £30-35m licensing revenue (excluding MIPS) for FY14.

Since we acquired MIPS we have seen steady progress and positive engagements from our customers. As we have explained previously, this is a long-term strategic investment which we expect to create significant value over the five year period and we are very pleased with progress so far.

The smartphone market alone is forecast by industry analysts to grow to an annual volume of around 1.6bn units by 2016. Given our strong existing and growing partnerships across both of the important established platforms, iOS and Android, where we have strong presence we believe a market share of around half of the total smartphone market is a reasonable and realistic goal.

Our strong presence in the fast-growing tablet market, where many of the leading platforms are using devices with our technology, with industry analysts suggesting this market will reach over 400m units by 2016, means this segment will make a notable contribution to the Group's progress. Additionally our good progress with a number of key Chinese and Taiwanese semiconductor partners is beginning to drive our technologies in the emerging lower-end tablet market.

The on-going transitions in TV/STB markets towards 'smart' functionality where we already have many active partners, supplemented by MIPS strong presence in this segment, continue to create significant design-win growth.

We expect to see accelerated progress in the licensing and deployment of our Ensigma communications and MIPS microcontroller technologies in the emerging Internet of Things.

In addition to the above markets our strategy and technologies have been constructed to ensure we are in a position to participate in other emerging or existing markets. Of notable mention is the wearable devices market where we are being designed in through multiple major partners and which we see as a significant growth area for the future. Other segments which we are fully engaged in include networking, automotive, industrial, infrastructure and the emerging healthcare technologies.

Despite the current economic environment, Pure continues to showcase effectively and drive some of our key technologies. Pure is an integral part of the Group's strategy and focuses on targeting emerging consumer markets that can benefit from a driver and pathfinder approach. This has been successfully executed in digital radio in the UK with the focus having moved to international development. Our strategy is leading to complementary areas involving home connectivity, automation and the provision of useful remote cloud services enabling a subscription business model.

As a result the Board remains confident that the Group is on track to deliver continued strong growth during the current financial year.

Sir Hossein Yassaie

19 June 2013

Condensed Consolidated Income Statement

During this year and the previous year all results arise from continuing operations.

Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Changes in Equity

Condensed Consolidated Statement of Cash Flows

Notes to the condensed consolidated financial statements

1. The financial information set out above does not constitute the company's statutory accounts for the years ended 30 April 2013 or 2012 but is derived from those accounts. Statutory accounts for 2012 have been delivered to the registrar of companies, and those for 2013 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

2. Segment Reporting 

The group determines and presents operating segments based on the information that is provided internally to the board of directors, which is the Group's chief operating decision maker. The Group is organised into two operating divisions which offer different services to different industries and are managed separately: the Technology business and the Pure business. The costs of the corporate head office and other costs which are not controlled by the operating divisions are allocated to these divisions. These divisions are the operating segments that are reported to the chief operating decision maker and are the group's reportable segments. There is no inter-segment trading. There is no significant seasonality in the Group's operations although there is an increase in trading in the period leading up to Christmas.

Principal activities are as follows:

Technology business - the development of embedded graphics, video, display, multi-threaded processor and multi-standard broadcast receiver and connectivity technologies for licensing to semiconductor companies for incorporation into silicon devices.

Pure business - the development and marketing of consumer products to showcase the technologies of the Technology business and to develop new and emerging markets for such technologies.

Information regarding the operations of each reportable segment is included below. Performance is measured based on operating profit.

Revenue is reported by geographical area of sales as follows:

The basis for attributing external customers to individual countries is the customer's country of domicile.

Revenue from the largest customer of the Group in the year, which is included in revenue for the Technology division, represents approximately £56,870,000 of the Group's total revenues. No other individual customer represents over 10% of the Group's revenue.

All revenue originated materially from United Kingdom.

The operating profit, net assets and capital expenditure of the Group materially relate to the United Kingdom.

3. Adjusted profit

Adjusted profit is used by management to measure the performance of the business year on year by excluding non-recurring items, non-cash based share incentive charges and amortisation of intangible assets acquired from acquisitions.

4. The Directors do not propose the payment of a dividend (2012: Nil).

5. Taxation

There was a net tax charge in the period of £5,884,000 (2012: £8,083,000).

The tax charge comprises:

·; UK corporation tax charge of £1,088,000 (2012: £4,540,000) on profits for the period. This charge is offset by excess taxable deductions on the exercise of shares, the credit for which has been taken to reserves

·; a tax charge on overseas earnings not recoverable in the year of £1,704,000 (2012: £1,416,000).

·; a deferred tax charge of £4,124,000 relating to the utilisation of a deferred tax asset previously recognised in respect of historical tax losses, and the effect of changes in tax rates (2012: £3,061,000)

·; a tax charge of £320,000 relating to the post acquisition trading of MIPS

·; a deferred tax credit of £1,352,000 relating to the release of the deferred tax liability created when acquiring MIPS in the current year, and HelloSoft Inc and Caustic Graphics Inc in 2010 (2012: £934,000)

6. Earnings per share

The basic earnings per share for the financial periods reported have been calculated on the weighted average number of shares in issue as shown in the table below. The diluted earnings per share have been calculated on the weighted average number of shares potentially in issue.

The 2012 Earnings per share figures have been restated for two elements. The weighted average number of shares in issue has been reduced by 3.6m shares to reflect the appropriate treatment of the shares held by the Employee Benefit Trust. The Taxation charge in the Adjusted Earnings per share calculation has been amended to reflect the tax that would have been payable on the Adjusted profit, replacing the previous charge which was based on the tax charge from the Income statement.

7. The Group's full Report & Financial Statements will be made available to shareholders by 30th August 2013. Additional copies will be available from the Company's registered office, Imagination House, Home Park Estate, Kings Langley, Hertfordshire WD4 8LZ.

8. The Annual General Meeting of Imagination Technologies Group plc will be held at Imagination House, Home Park Estate, Kings Langley, Hertfordshire WD4 8LZ at 11.00am on 20th September 2013.